CORVAS INTERNATIONAL INC, 424B1, 1996-07-08

CORVAS INTERNATIONAL INC
424B1, 1996-07-08
PHARMACEUTICAL PREPARATIONS

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1,000,000 SHARES

CORVAS INTERNATIONAL, INC.

COMMON STOCK

-----------------------

All of the shares of Common Stock offered hereby are being sold by Corvas
International, Inc. ("Corvas" or the "Company"). The Company's Common Stock is
quoted on the Nasdaq National Market under the symbol CVAS. On June 21, 1996,
the last reported sale price of the Common Stock was $5.25 per share. See
"Price Range of Common Stock."

-----------------------

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 5 OF
THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.

-----------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

PRICE TO PROCEEDS TO
PUBLIC COMPANY(1)
Per Share $5.00 $5.00
Total $5,000,000 $5,000,000

(1) Before deducting expenses payable by the Company estimated at approximately
$126,000.

-----------------------

The shares of Common Stock offered hereby are offered directly by the
Company on a best efforts basis principally to selected institutional
investors. It is expected that delivery of such shares will be made against
payment therefor on or about July 3, 1996. The Company has not made any
arrangements to place the funds received for such shares in an escrow, trust
or similar arrangement. In the event that investor funds are not received in
full in the amount necessary to satisfy the requirements of the offering
within 30 days of the date of this Prospectus, this offering may be
terminated by the Company. There is no minimum required purchase of the
shares offered hereby. See "Plan of Distribution."

THE DATE OF THIS PROSPECTUS IS JULY 2, 1996.

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION, INCLUDING RISK FACTORS AND CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE FORWARD-
LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE
NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS", AS WELL AS THOSE DISCUSSED
ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY

Corvas International, Inc. ("Corvas" or the "Company") is a
biopharmaceutical firm engaged in the design and development of a new generation
of therapeutic agents in the fields of thrombosis and inflammation. The Company
seeks to develop and to commercialize novel drugs for the improved treatment and
prevention of major cardiovascular diseases, such as heart attack, stroke, deep
vein thrombosis, pulmonary embolism, and acute inflammation associated with
trauma, shock and reperfusion injury in stroke. In contrast to currently
available therapies, the Company's candidate drugs are designed to intervene
more specifically in the disease process. Corvas intends to develop both
parenteral and oral drugs to treat patients who cannot be optimally treated with
current therapeutics. The Company believes that its antithrombotic drug
discovery and development program is among the most comprehensive in the
industry and that, together with its alliance partner, it is well positioned to
develop and commercialize orally-active antithrombotic agents.

Corvas has discovered its portfolio of drug candidates by integrating the
Company's in-depth knowledge of the biology of thrombosis and, more generally,
vascular biology, with advanced and proprietary drug discovery and design
technology. The Company believes that such technology has broad potential
application outside the antithrombotic field and will provide the basis for
expanding its product portfolio.

Corvas' scientists are experienced in a wide range of disciplines which are
integrated in a systematic discovery approach. Current programs employ
medicinal chemistry, peptide chemistry, computer-aided drug design, structural
biology, molecular biology, biochemistry, physiology, and pharmacology
competencies. The Company's programs are based on three technology platforms:
structure-based drug design, biological discovery, and molecular pharmacology.
The first two platforms generate drug leads, while the third technology platform
enables the selection of drug candidates.

The Company's structure-based drug design programs are the source of small
molecule drugs, including those demonstrating oral activity. Biological
discovery methods, including novel gene discovery, cloning, expression, and
mutagenesis methods are used to identify novel biologicals as drug candidates
and discovery tools. Molecular pharmacology techniques, including IN VITRO
biochemical analysis and IN VIVO biological testing, are used to rigorously
characterize the many drug leads derived from the two other platforms in order
to select specific drug candidates for preclinical and clinical development.

The Company has several antithrombotic compounds in clinical and
preclinical development, including orally-active thrombin inhibitors, which are
being developed in collaboration with Schering Corporation ("Schering-Plough").
Corvas has developed a portfolio of orally-active, potent and selective thrombin
inhibitors upon which this alliance is based. In the second half of 1995,
Corvas conducted an initial human safety study of CVS-1123, a lead orally-active
thrombin inhibitor. In this Phase Ia study, CVS-1123 demonstrated oral activity
and was well tolerated. Corvas and Schering-Plough are actively evaluating a
series of follow-on compounds in the same chemical class in order to select a
candidate for development by Schering-Plough. This selection is expected to be
made by the end of 1996.

Corvas is also conducting active discovery programs for inhibitors of
coagulation Factor Xa and Factor VIIa, with its co-factor tissue factor
("Factor VIIa/TF"). The primary goal of these programs is the development of
safe and effective orally-active drugs. A secondary goal has been the
development of parenteral agents targeting these factors. In 1994, Schering-
Plough acquired an option to expand its alliance with Corvas to include Factor
Xa

2.
<PAGE>

inhibitors. In January 1996, Schering-Plough made a $1,000,000 payment to
extend its option rights until December 1996.

In 1995, Company scientists presented initial scientific data on a newly
discovered class of natural anticoagulant peptides known as the NAP family.
Specific members of this family inhibit either Factor Xa or Factor VIIa/TF. The
Company has selected and commenced preclinical development of a Factor VIIa/TF
inhibitor as a parenteral agent for acute care indications, such as treatment of
venous thrombosis and prevention of pulmonary embolism.

In its anti-inflammatory program, the Company has discovered a promising
novel protein, neutrophil inhibitory factor ("NIF"), which blocks certain white
blood cell functions associated with inflammation. In 1995, initial studies
demonstrating the potential of NIF as a therapy for stroke victims were
presented at a scientific conference by Corvas collaborators and published in a
leading journal. Based on these early results, the Company entered into an
agreement with Pfizer Inc. ("Pfizer") to collaborate on the development of NIF.

A Phase Ia clinical trial has been completed for the Company's first drug
candidate, CORSEVIN M, an antibody-based antithrombotic which has been licensed
to, and is being further developed by, Centocor, Inc. ("Centocor").

In 1992, Corvas entered into an alliance with Ortho Diagnostic Systems,
Inc. ("Ortho"), a Johnson & Johnson company, to develop and commercialize a
laboratory test for blood clotting function based on Corvas' proprietary
technology. Corvas supplies a critical raw material, recombinant human tissue
factor, to Ortho and has licensed rights to Ortho. Ortho currently produces and
markets prothrombin time reagents based on such technology.

The Company's principal executive offices are located at 3030 Science Park
Road, San Diego, California 92121 and its telephone number is (619) 455-9800.
Unless the context otherwise requires, "Corvas" and the "Company" refer to
Corvas International, Inc., and its subsidiaries, if any.

CORVAS-Registered Trademark- is a registered trademark, and the Corvas
logo, CORTHROMBIN-TM-, CORDECIN AS-TM-, CORSEVIN AS-TM- and CORSEVIN M-TM- are
trademarks, of the Company. The Prospectus also includes names and marks of
companies other than the Company.

<PAGE>

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Common Stock offered hereby. . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 shares
Common Stock to be outstanding after the offering. . . . . . . . . . . . . . 13,682,471 (1)
Use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Research, development, preclinical
and clinical testing, and working capital and
general corporate purposes. See "Use of Proceeds."
Nasdaq National Market symbol. . . . . . . . . . . . . . . . . . . . . . . . CVAS
</TABLE>

SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share amounts)

CONSOLIDATED STATEMENTS OF OPERATIONS DATA:

<TABLE>
<CAPTION> THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> (UNAUDITED)
<C> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $ 1,268 $ 886 $ 845 $ 1,130 $ 5,402 $ 1,080 $ 2,187

Research and development costs . . . . . . 6,252 8,894 12,115 11,378 9,723 2,259 2,299

Total costs and expenses . . . . . . . . . 12,208 12,044 15,287 16,730 12,516 2,946 3,116

Net loss . . . . . . . . . . . . . . . . . (10,098) (9,467) (13,369) (14,903) (6,293) (1,649) (631)

Net loss per share (2) . . . . . . . . . . (2.14) (1.08) (1.44) (1.60) (0.67) (0.18) (0.05)

Shares used in calculation
of net loss per share (2) . . . . . . . 4,724 8,747 9,295 9,336 9,374 9,359 11,507
</TABLE>

CONSOLIDATED BALANCE SHEETS DATA:

<TABLE>
<CAPTION>
December 31, March 31, 1996
---------------------------
1995 Actual As Adjusted (3)
------------- --------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
Cash, cash equivalents and short-term
debt securities. . . . . . . . . . . . .$12,451 $24,908 $29,782

Working capital. . . . . . . . . . . . . . 7,372 21,570 26,444

<PAGE>

Total assets . . . . . . . . . . . . . . . 14,462 27,370 32,244
Accumulated deficit. . . . . . . . . . . .(60,588) (61,219) (61,219)
Total stockholders' equity. . . . . . . . 8,768 23,118 27,992
</TABLE>

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(1) Excludes, as of May 24, 1996, 1,701,903 shares of Common Stock issuable
upon exercise of outstanding options at a weighted average price of $3.47
per share and 3,008,715 shares of Common Stock issuable upon the exercise
of outstanding warrants at a weighted average price of $6.00 per share.

(2) See Note 2 of Notes to Consolidated Financial Statements.

(3) As adjusted to give effect to the issuance of 1,000,000 shares of Common
Stock offered hereby at an offering price of $4.87 per share net of
estimated offering expenses. See "Use of Proceeds" and "Capitalization."

<PAGE>

RISK FACTORS

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS SET
FORTH BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING THE COMMON STOCK
OFFERED HEREBY:

EARLY STAGE OF DEVELOPMENT

The Company is at an early stage of development. Corvas has only three
products from which it derives revenue: recombinant human tissue factor used in
a diagnostic test to determine the blood clotting ability of patients, and
recombinant human tissue factor and a group of tissue factor-specific monoclonal
antibodies used in the research market. The revenue generated from such
products has not been substantial in any given year. In addition, Corvas has
conducted human clinical trials for only two product candidates, CVS-1123 and
CORSEVIN M. The Company's product candidates will require significant
additional development, laboratory and clinical trials, regulatory approval and
additional investment prior to their commercialization. The Company does not
expect to be able to market any of these product candidates for a number of
years. There can be no assurance that the Company's product development efforts
will progress any further or be successfully completed. In addition, there can
be no assurance that the Company's potential products will be capable of being
produced in commercial quantities at reasonable costs, that required regulatory
approvals can be obtained or that any potential products, if introduced, will be
successfully marketed or achieve customer acceptance.

CONTINUING OPERATING LOSSES; ACCUMULATED DEFICIT

The Company has experienced significant operating losses since its
inception in 1987. At March 31, 1996, the Company had an accumulated deficit
of approximately $61,219,000. The Company expects to incur substantial
additional operating losses over the next several years as the Company attempts
to sustain, and possibly expand, its research and development and clinical trial
efforts. Substantially all of the Company's revenues to date have consisted of
revenue from collaborative agreements, research grants and interest income. To
achieve profitable operations, the Company, alone or with others, must
successfully identify, develop, manufacture and market additional proprietary
products. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING

The Company will require substantial funds to conduct the research and
development and preclinical and clinical testing of its products, to establish
commercial scale manufacturing facilities and to market its products. The
Company's future capital requirements will depend on many factors, including,
but not limited to, the following factors: continued scientific progress in its
drug discovery programs; the magnitude of these programs; progress of
preclinical testing and clinical trials; the time and costs involved in
obtaining regulatory approvals; the costs involved in filing, prosecuting,
maintaining and enforcing patent claims; competing technological and market
developments; changes in its existing research relationships; the ability of the
Company to establish and maintain collaborative or licensing arrangements; the
cost of manufacturing scale-up; and effective commercialization activities and
arrangements. The Company intends to seek such additional funding either
through collaborative arrangements or through public or private financings.
There can be no assurance that additional financing will be available, or, if
available, that it will be available on acceptable terms. If additional funds
are raised by issuing securities, further dilution to existing stockholders may
result. If adequate funds are not available, the Company may be required to
delay, scale back or eliminate one or more of its drug discovery programs or
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies, product
candidates or products that the Company would not otherwise relinquish.

<PAGE>

UNPREDICTABILITY OF, AND LIMITED EXPERIENCE IN, CONDUCTING PRECLINICAL AND
CLINICAL TRIALS

Although certain of the Company's officers and employees have prior
experience in conducting clinical trials, the Company itself has conducted only
two early-stage clinical trials to date; Phase Ia clinical trials of CVS-1123
and Phase Ia clinical trials of CORSEVIN M. At present, the Company intends to
commence Phase I clinical trials in 1997 of a NAP compound. There can be no
assurance that the Company will be able to commence any or all of the clinical
trials as currently planned for 1997, or that the Company will meet its
development schedule for any of its products in development. If the Company or
its collaborators were unable to commence clinical trials as planned, complete
the clinical trials or demonstrate the safety and efficacy of its products, the
Company's business, financial condition and results of operations would be
materially and adversely affected. There can be no assurance that if a product
from the Company's research and development programs or any other therapeutic
product is successfully developed according to plans, it will be approved by the
U.S. Food and Drug Administration ("FDA") on a timely basis or at all.

In addition, because the Company will, in a number of cases, rely on its
contractual rights to access data collected by others in phases of its clinical
trials, the Company is dependent on the continued satisfaction by such parties
of their contractual obligations to provide such access and to cooperate with
the Company in the execution of successful filings with the FDA. There can be
no assurance that the FDA will permit such reliance. If the Company were unable
to rely on clinical data collected by others, the Company may be required to
repeat clinical trials, which could significantly delay commercialization and
require significantly greater capital.

Before obtaining regulatory approvals for the commercial sale of any of its
products under development, the Company must demonstrate through preclinical
studies and clinical trials that the product is safe and efficacious for use in
the target indication for which approval is sought. The results from
preclinical studies and early clinical trials may not be predictive of results
that will be obtained in later-stage testing, and there can be no assurance that
future clinical trials conducted by the Company or its collaborators will
demonstrate the safety and efficacy of any products or will result in approval
to market products. A number of companies in the biotechnology industry have
suffered significant setbacks in advanced clinical trials, even after promising
results in earlier trials.

The rate of completion of the Company's clinical trials is dependent upon,
among other factors, the rate of patient enrollment. Patient enrollment is a
function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the study. Delays in planned patient enrollment may
result in increased costs and delays, which could have a material adverse effect
on the Company.

UNCERTAINTIES OF REGULATORY APPROVAL; GOVERNMENT REGULATION

The time required for completing such testing and obtaining such approvals
is uncertain and approval itself may not be obtained. The Company has conducted
human clinical testing of two product candidates, CVS-1123 and CORSEVIN M. No
additional human tests of CVS-1123 are currently planned. Further testing of
CORSEVIN M, by Centocor, and the Company's other product candidates in research
and development may reveal undesirable and unintended side effects or other
characteristics that may prevent or limit their commercial use. The FDA or the
Company and its collaborators may decide to discontinue or to suspend clinical
trials at any time if the subjects or patients who are participating in such
trials are being exposed to unacceptable health risks. There can be no
assurance that the Company will not encounter problems in clinical trials that
will cause the FDA or the Company to delay or to suspend clinical trials.
Furthermore, there can be no assurance that any of the Company's products will
be approved by the FDA for any indication. Products, if any, resulting from the
Company's research and development programs are not expected to be commercially
available for a number of years. Even if regulatory

<PAGE>

approval of a product is granted, such approval may entail limitations on the
indicated uses for which the product may be marketed. In addition, a marketed
product, its manufacturer and the facilities in which the product is
manufactured are subject to continual review and periodic inspections. Later
discovery of previously unknown problems with a product, manufacturer or
facility may result in restrictions on such product or manufacturer, including
withdrawal of the product from the market. See "Business - Government
Regulation."

RELIANCE ON COLLABORATIVE PARTNERS

Corvas has relied and will continue to rely on certain established
pharmaceutical companies interested in its technology to fund a portion of its
research and development expenses. The Company has entered into collaborative
research agreements with these collaborative partners whereby the partners
provide capital in exchange for certain technology, product, manufacturing and
marketing rights related to the collaborative research.

In November 1991, the Company entered into an agreement with Centocor
pursuant to which Corvas granted rights to Centocor to license and to
commercialize certain monoclonal antibody products developed by Corvas. For one
such monoclonal antibody product, CORSEVIN M, Corvas completed a Phase Ia
clinical trial in 1993. Centocor has informed the Company that it intends to
continue the development of CORSEVIN M. In 1994, Centocor terminated its option
rights to future monoclonal antibody products discovered or acquired by the
Company. Corvas will depend on Centocor for the continued development of
CORSEVIN M and resulting product sales. The Company may receive a future
milestone payment upon receipt of certain regulatory approvals and royalties on
any product sales.

To date, Corvas has entered into collaborative agreements with Pfizer for
the development of NIF, with Schering-Plough for the discovery and
commercialization of oral thrombin inhibitor drugs for the prevention and
treatment of chronic cardiovascular disorders, with Ortho for the manufacture
and worldwide marketing by Ortho of diagnostic tests containing recombinant
human tissue factor produced by Corvas and with Centocor pursuant to which
Corvas granted rights to Centocor to license and commercialize certain
monoclonal antibody products developed by Corvas. As a result, the Company is
dependent on Pfizer, Schering-Plough and Centocor with respect to the regulatory
filings relating to, and the clinical testing of, certain of the Company's
product candidates developed under the collaborations described above. Any of
Pfizer, Schering-Plough or Centocor may, based on data obtained in these trials
or otherwise, elect to halt or repeat these trials or conduct clinical trials
using different formulations of these product candidates. Any of these actions
could result in delays in the clinical development of compounds covered by these
collaborations. Furthermore, the amount and timing of resources dedicated by
these strategic partners to the collaborations is not within the Company's
control. In addition, Corvas is dependent on the efforts of Ortho in order to
receive revenue from the recombinant human tissue factor produced by the
Company. There can be no assurance that the interests of the Company will
continue to coincide with those of its collaborators or that the collaborators
will not develop independently or with third parties, products that could
compete with the Company's products, or that disagreements over rights,
technology or other proprietary interests will not occur. Further, there can be
no assurance that the collaborative agreements will be extended at the end of
their respective terms. If any of the Company's collaborators breaches or
terminates its agreement with the Company, or fails to conduct its collaborative
activities in a timely manner, the research program under the applicable
collaborative agreement, or the development and commercialization of product
candidates subject to such collaboration, may be adversely affected. There can
be no assurance that the Company's existing strategic alliances will be
successful, that the Company will receive any further payments pursuant to the
collaborative agreements or that the collaborations will continue. If the
strategic alliances are not continued or successful, the Company's business
could be materially and adversely affected.

Corvas has also established collaborations with scientists at a number of
leading U.S. and European academic and clinical research centers to further its
technology and product development objectives. These collaborations are
generally conducted pursuant to agreements which give the Company a license, or
the option to license, certain technology, patent rights or materials which may
be valuable to the Company. These agreements may require the Company to fund
research or to pay license fees or milestone payments and, upon commercial sale
of certain products, royalties.

<PAGE>

Corvas also expects to rely on additional collaborative arrangements to
develop and commercialize some of its products in the future. There can be no
assurance that the Company will be able to negotiate acceptable collaborative
arrangements, in the future, or that such collaborative arrangements or its
existing collaborative arrangements, will be successful. In addition,
collaborative partners may pursue alternative technologies or develop
alternative compounds either on their own or in collaboration with others,
including the Company's competitors, as a means of developing treatments for the
diseases targeted by any collaborative programs. See "Business - Strategic
Alliances."

TECHNOLOGICAL CHANGE AND COMPETITION

The Company is engaged in a rapidly evolving field. Competition from other
biotechnology companies, pharmaceutical companies and research and academic
institutions is intense and expected to increase. There can be no assurance
that the Company's competitors will not succeed in developing products based on
the Company's technology or other technologies which are more effective than
technologies being developed by the Company or which would render the Company's
technology and products obsolete and noncompetitive.

Many of the Company's competitors may have substantially greater financial,
technical and human resources than the Company. In addition, many of these
competitors may have significantly greater experience than the Company in
undertaking preclinical testing and clinical trials of new pharmaceutical
products and obtaining regulatory approvals of human therapeutic products.
Accordingly, the Company's competitors may succeed in obtaining FDA approval for
products more rapidly than the Company. Furthermore, if the FDA permits the
Company to commence commercial sales of products, the Company will compete with
respect to manufacturing efficiency and marketing capabilities, areas in which
it has limited or no experience.

Products under development by the Company address an array of markets. The
Company's competition will be determined in part by the potential indications
for which the Company's compounds are developed and ultimately are approved by
regulatory authorities. For certain of the Company's potential products, an
important factor in competition may be the timing of market introduction of its,
or competitive, products. Accordingly, the relative speed with which Corvas can
develop products, complete the clinical trials and approval processes, and
supply commercial quantities of the products to the market is expected to be an
important competitive factor. The Company expects that competition among
products approved for sale will be based on, among other things, product
efficacy, safety, reliability, availability, price and patent position. See
"Business - Competition."

MANUFACTURING LIMITATIONS

In order for the Company's products to be successful, the products must be
manufactured in sufficient commercial quantities, in compliance with regulatory
requirements, and at an acceptable cost. The Company has limited experience in
pilot scale manufacturing. For larger scale production, as will be required for
Phase I and later phases of clinical testing, the Company must rely on third
parties to manufacture its product candidates. If the Company is unable to
develop or contract for large scale manufacturing capabilities on acceptable
terms, the Company's ability to conduct clinical trials may be adversely
affected, resulting in the delay of submission of products for regulatory
approval, which in turn could adversely affect the Company's competitive
position and its chances of achieving profitability. See "Business - Properties
and Manufacturing."

PATENTS AND PROPRIETARY RIGHTS

<PAGE>

these pending patent applications are duplicate applications the Company filed
in anticipation of changes to U.S. patent law that became effective in June 1995
and that may affect the term of U.S. patents. Foreign counterparts of certain
of the U.S. applications have been filed in many countries. In addition, Corvas
holds rights in four foreign-issued patents; Corvas owns one such patent and is
the exclusive licensee, in a defined field of use, of the remaining three
foreign patents. There can be no assurance that patents will issue from any of
the patent applications owned or licensed by the Company or that claims allowed
under any issued patents will be sufficiently broad to protect the Company's
technology. In addition, there can be no assurance that any patents issued or
licensed to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide proprietary protection to the
Company.

As is typical in the biotechnology industry, the commercial success of the
Company will depend in part on the Company neither being found infringing on
patents issued to competitors nor breaching the technology licenses upon which
the Company's products might be based. While the Company is aware of third
party patent applications and issued patents in the Company's field, it is
uncertain whether these will require the Company to alter products or
processes, obtain licenses or cease certain activities. If the Company is
required to obtain such licenses, there can be no assurance the Company will
be able to obtain any necessary licenses at a reasonable cost. Failure by the
Company to obtain a license to any technology that it requires to
commercialize its products and obtain FDA approval within an acceptable
period of time, if required to do so, would have a material adverse effect on
the Company. Litigation, which could result in substantial costs to the
Company, may also be necessary to enforce any patents issued to the Company
or to determine the scope and validity of others' proprietary rights.

In 1993, the U.S. Patent and Trademark Office declared an interference and
is currently in the process of determining the priority of invention between a
patent for which some rights are licensed to the Company and a patent
application for which rights are licensed to another party. The subject matter
of these licenses is recombinant tissue factor which is used by Ortho to
determine the blood clotting ability of patients. There can be no assurance
that the U.S. Patent and Trademark Office will rule in a manner favorable to the
Company on this matter.

In addition to patents, the Company relies on trade secrets and proprietary
know-how, which it seeks to protect, in part, through appropriate
confidentiality and proprietary information and inventions agreements with its
current and prospective collaborative partners, employees, scientific advisors
and consultants. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach, or that
the Company's trade secrets will not otherwise become known or be independently
discovered by competitors.

Certain of the Company's research has been funded in part by the Federal
Small Business Innovation Research ("SBIR") program. As a result of such
funding, the U.S. Government will have certain rights ("Government Rights") in
any technology, including inventions, developed with the funding. These rights
include the grant of a non-exclusive, paid-up, worldwide license to such
inventions for any governmental purpose. In addition, the government has the
right to require the Company to grant an exclusive license to any of such
inventions to a third party if the government determines that (i) adequate steps
have not been taken to commercialize such inventions, (ii) such action is
necessary to meet public health or safety needs or (iii) such action is
necessary to meet requirements for public use under federal regulations.
Federal law requires any licensor of an invention that was partially funded by
federal grants to obtain a covenant from its exclusive licensee to substantially
manufacture products using the invention in the U.S. In addition, the Company's
licenses may also relate to technology developed with federal funding and,
therefore, may also be subject to Government Rights. See "Business - Patents
and Proprietary Rights."

ABSENCE OF SALES AND MARKETING EXPERIENCE

The Company has no experience in sales, marketing or distribution. To
market any of its products directly, the Company must develop a substantial
marketing and sales force with technical expertise and supporting distribution
capability. Alternatively, the Company may obtain the assistance of a
pharmaceutical company with a large distribution system and a large direct sales
force. Other than its agreements with Ortho, Centocor, Schering-Plough and
Pfizer, the Company does not have any existing distribution arrangements with
any pharmaceutical company

10.

<PAGE>

for its products. There can be no assurance that the Company will be able to
establish sales and distribution capabilities or be successful in gaining market
acceptance for its products.

DEPENDENCE ON REIMBURSEMENT

Corvas' ability to commercialize its products successfully may depend in
part on the extent to which reimbursement for the cost of such products and
related treatment will be available from government health administration
authorities, private health insurers and other organizations. Third-party
payors are increasingly challenging the price of medical products and services.
Significant uncertainty exists as to the reimbursement status of newly approved
health care products, and there can be no assurance that adequate third-party
coverage will be available to enable Corvas to maintain price levels sufficient
to realize an appropriate return on its investment in product development.

PRODUCT LIABILITY AND INSURANCE

The Company's business exposes it to potential product liability risks
which are inherent in the testing, manufacturing and marketing of human
diagnostic and therapeutic products. While it has been the Company's practice
to obtain clinical trials liability insurance when appropriate, there can be no
assurance that it will be able to obtain or to maintain such insurance on
acceptable terms or that insurance will provide adequate coverage against
potential liabilities.

HAZARDOUS MATERIALS

The Company's research and development involves the controlled use of
hazardous materials, chemicals and radioactive compounds. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for any damages that result, which liability could exceed the resources of the
Company.

VOLATILITY OF COMMON STOCK PRICE

The market prices for securities of biotechnology companies, including
Corvas, have historically been highly volatile, and the market from time to time
has experienced significant price and volume fluctuations that are unrelated to
the operating performance of such companies. Factors such as announcements of
technological innovations or new commercial therapeutic products by the Company
or others, governmental regulations, developments in patent or other proprietary
rights, developments in the Company's relationships with its collaborative
partners, public concern as to the safety of drugs developed by the Company or
others and general market conditions may have a significant effect on the market
price of the Company's Common Stock. Fluctuations in financial performance from
period to period also may have a significant impact on the market price of the
Common Stock. See "Price Range of Common Stock."

11.

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 1,000,000 shares of
Common Stock offered by the Company hereby at an offering price of $5.00
are estimated to be approximately $4,874,000, after deducting estimated
offering expenses. The Company expects to use the net proceeds of this
offering to continue research and development activities and preclinical and
clinical testing, and for working capital and general corporate purposes. The
Company may also use a portion of such net proceeds and existing cash and
investment balances to acquire or to invest in businesses, products or
technologies that are complementary to those of the Company, although no such
material acquisitions are planned or being negotiated as of the date of this
Prospectus, and no portion of the net proceeds has been allocated for any
specific material acquisition. Pending such uses, the net proceeds will be
invested in interest bearing, investment grade securities.

The amounts actually expended for such purposes may vary significantly
depending upon numerous factors, including progress of the Company's drug
programs, the number and breadth of these programs, achievement of milestones
under strategic alliance arrangements, the ability of the Company to establish
and maintain additional strategic alliances and licensing arrangements, the
progress of the development and commercialization efforts of the Company's
strategic alliance partners, competing technological and market developments,
the costs involved in preparing, filing, prosecuting, maintaining and enforcing
patent claims and other intellectual property rights, the regulatory process and
other factors.

DIVIDEND POLICY

The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to finance
the growth and development of its business and therefore does not anticipate
paying any cash dividends in the foreseeable future.

12.

<PAGE>

PRICE RANGE OF COMMON STOCK

The Company's Common Stock began trading on the Nasdaq National Market on
January 30, 1992 under the symbol "CVAS." Prior to January 30, 1992, there was
no public market for the Company's Common Stock. The following table sets forth
for the periods indicated the high and low sale prices of Common Stock as
reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDING DECEMBER 31, 1996
Second Quarter (through June 21, 1996) . . . . . . $7 $4 3/4
First Quarter . . . . . . . . . . . . . . . . . . 6 1/8 3 5/8

YEAR ENDED DECEMBER 31, 1995 . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . 7 3/8 2 1/8
Third Quarter. . . . . . . . . . . . . . . . . . . 4 5/8 2 3/8
Second Quarter . . . . . . . . . . . . . . . . . . 2 7/8 1 5/8
First Quarter. . . . . . . . . . . . . . . . . . . 2 5/8 1 7/8

YEAR ENDING DECEMBER 31, 1994
Fourth Quarter . . . . . . . . . . . . . . . . . . 3 1 5/8
Third Quarter. . . . . . . . . . . . . . . . . . . 3 1/4 2 1/8
Second Quarter . . . . . . . . . . . . . . . . . . 4 1/2 2 7/8
First Quarter. . . . . . . . . . . . . . . . . . . 5 1/4 3 3/4

</TABLE>

On June 21, 1996, the last reported sale price of the Common Stock was
$5.25 per share. As of June 21, 1996, there were approximately 1,214 holders
of record of the Common Stock.

13.
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company (i) as
of March 31, 1996 and (ii) as adjusted to give effect to the issuance of
1,000,000 shares of Common Stock offered hereby at an offering price of $5.00
per share after deducting estimated offering expenses.

<TABLE>
<CAPTION>
MARCH 31, 1996
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
-------------------------------
Actual As Adjusted
-------------- ----------------
<S> <C> <C>

Long-term debt, net of current portion $ 7 $ 7
Stockholders' equity:
Series A convertible preferred stock, $.001 par value,
authorized 10,000,000 shares, issued and outstanding
1,000,000 shares actual and as adjusted 1 1

Common stock, $.001 par value, authorized
50,000,000 shares, issued and outstanding
12,522,000 shares actual and 13,522,000 shares
outstanding as adjusted (1) 13 14

Additional paid-in capital 84,323 89,196

Accumulated deficit (61,219) (61,219)
------------ ------------

Total stockholders' equity 23,118 27,992
------------ ------------

Total capitalization $ 23,125 $ 27,999
------------ ------------
------------ ------------

- ----------------------
</TABLE>

(1) Excludes(i) 1,499,917 shares of Common Stock issuable upon exercise of
options outstanding as of March 31, 1996 at a weighted average exercise
price of $3.06 per share and (ii) 3,008,715 shares of Common Stock as of
March 31, 1996 issuable upon exercise of warrants outstanding as of
March 31, 1996 at a weighted average exercise price of $6.00 per share.
Subsequent to March 31, 1996, options to purchase 85,619 of these shares
were exercised and options to purchase an additional 287,605 shares of
Common Stock (net of cancellations) were granted. See "Description of
Capital Stock" and Note 13

14.

<PAGE>

of Notes to Consolidated Financial Statements. Also excludes 75,000 shares of
Common Stock issued in May 1996 in connection with the settlement of a lawsuit.
See "Business - Legal Proceedings."

15.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The selected data presented below under the captions "Consolidated
Statements of Operations Data" and "Consolidated Balance Sheets Data" for, and
as of the end of, each of the years in the five-year periods ended December 31,
1995, are derived from the consolidated financial statements of Corvas
International, Inc. and Subsidiary, which financial statements have been audited
by KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements as of December 31, 1994 and 1995, and for each
of the years in the three-year period ended December 31, 1995, and the report
thereon, are included elsewhere in this Prospectus. The selected data presented
below for the three-month periods ended March 31, 1995 and 1996 are derived from
the unaudited consolidated financial statements included elsewhere in this
Prospectus and, in the opinion of management, includes all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for such interim periods. Operating
results for the three months ended March 31, 1996 are not necessarily indicative
of results for the full year or for any future period. The data set forth below
should be read in conjunction with the consolidated financial statements and
related notes included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
----------------------------------------------- ------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements of Operations Data
(In thousands, except per share amounts):

REVENUES:
Net product sales. . . . . . . . . . . . . . $ 121 $ 263 $ 323 $ 280 $ 406 $ 46 $ 21
Research grants. . . . . . . . . . . . . . . 397 513 192 667 -- -- --
Revenue from collaborative
agreements (primarily
from related party). . . . . . . . . . . . -- -- -- -- 4,354 1,000 2,085
License fees . . . . . . . . . . . . . . . . 750 100 100 -- 500 -- --
Royalties. . . . . . . . . . . . . . . . . . -- 10 230 183 142 34 81
-------- -------- -------- -------- -------- -------- --------
Total revenues . . . . . . . . . . . . . . . 1,268 886 845 1,130 5,402 1,080 2,187
-------- -------- -------- -------- -------- -------- --------
COSTS AND EXPENSES:

Cost of products sold. . . . . . . . . . . . 17 106 105 83 211 5 24
Research and development . . . . . . . . . . 6,252 8,894 12,115 11,378 9,723 2,259 2,299
Purchased research and
development. . . . . . . . . . . . . . . . 4,060 -- -- -- -- -- --
General and administrative . . . . . . . . . 1,879 3,044 3,067 3,159 2,582 682 793
Litigation settlement and
related expenses . . . . . . . . . . . . . -- -- -- 535 -- -- --
Restructuring charge . . . . . . . . . . . . -- -- -- 1,575 -- -- --
-------- -------- -------- -------- -------- -------- --------

16.

<PAGE>

Total costs and expenses . . . . . . . . . . 12,208 12,044 15,287 16,730 12,516 2,946 3,116
-------- -------- -------- -------- -------- -------- --------

Loss from operations . . . . . . . . . . . . (10,940) (11,158) (14,442) (15,600) (7,114) (1,866) (929)
Other income, net. . . . . . . . . . . . . . 842 1,691 1,073 697 821 217 298
-------- -------- -------- -------- -------- -------- --------

Net loss . . . . . . . . . . . . . . . . . . $(10,098) $(9,467) $(13,369) $(14,903) $(6,293) $(1,649) $ (631)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net loss per share (1) . . . . . . . . . . . $ (2.14) $ (1.08) $ (1.44) $ (1.60) $ (0.67) $ (0.18) $ (0.05)
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Shares used in calculation of net
loss per share (1) . . . . . . . . . . . . . 4,724 8,747 9,295 9,336 9,374 9,359 11,507
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
</TABLE>

17.

<PAGE>

<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------ March 31,
1991 1992 1993 1994 1995 1996
--------- -------- -------- -------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheets Data
(In thousands):
Cash, cash equivalents and
short-term debt securities . . . . . . . . . $13,853 $ 36,398 $ 23,180 $ 19,867 $ 12,451 $24,908
Working capital. . . . . . . . . . . . . . . 13,764 20,987 22,477 13,902 7,372 21,570
Total assets . . . . . . . . . . . . . . . . 16,153 38,925 26,522 22,509 14,462 27,370
Accumulated deficit. . . . . . . . . . . . . (16,556) (26,023) (39,392) (54,295) (60,588) (61,219)
Total stockholders' equity . . . . . . . . . 14,260 37,592 24,474 14,647 8,768 23,118
</TABLE>

(1) See Note 2 of Notes to Consolidated Financial Statements.

18.

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
PROJECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN THIS SECTION, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Formed in 1987, Corvas is a biopharmaceutical firm engaged in the design
and development of a new generation of therapeutic agents for the prevention and
treatment of major cardiovascular and inflammatory diseases. To date, the
Company has not generated significant revenues from product sales. The Company
has not been profitable since inception and expects to incur substantial
additional operating losses on an annual basis over the next several years as
the Company attempts to sustain, and possibly expand, its research and
development and clinical trial efforts. No assurance can be given that the
Company can generate sufficient revenues to become profitable at all or on a
sustained basis. At March 31, 1996, the Company had an accumulated deficit of
$61,219,000.

In December 1994, the Company ceased operation of its Belgian subsidiary
and, accordingly, recorded a one-time restructuring charge for severance and
other expenses. The Belgian operation accounted for 20% of the consolidated
operating expenses in 1994 (including the restructuring charge of $1,575,000)
and 20% in 1993.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1996 AND 1995

Operating revenues increased from $1,080,000 in the quarter ended March 31,
1995 to $2,187,000 in the first quarter of 1996. This increase is mainly
attributable to a $1,000,000 option extension fee received from Schering-Plough
pursuant to a strategic alliance agreement for the prevention and treatment of
chronic cardiovascular disorders. Accounting for $85,000 of this increase is
revenue recognized pursuant to the research and option agreement initiated in
October 1995 with Pfizer to collaborate on the development of neutrophil
inhibitory factor, an anti-inflammatory agent.

First quarter total costs and expenses increased from $2,946,000 in 1995 to
$3,116,000 in 1996. Research and development expenditures remained relatively
constant comparing these periods, increasing by $40,000. General and
administrative expenses increased by $111,000 in the first quarter of 1996 over
the same quarter of 1995 due to increased personnel costs and investor relations
activities.

Comparing the first quarters of 1995 to 1996, total other income increased
from $217,000 to $298,000. The majority of this increase resulted from the sale
of material to Pfizer in conjunction with the above-mentioned collaboration.

Differences in the timing and composition of revenues earned and expenses
incurred may contribute to quarter-to-quarter variations in operating results.

19.

<PAGE>

YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

Operating revenues increased to $5,402,000 in 1995, from $1,130,000 in 1994
and $845,000 in 1993. The major factor contributing to this increase in 1995
was the recognition of $4,354,000 of revenue from collaborative agreements. Of
this revenue, $4,000,000 is attributable to the Company's strategic alliance
agreement with Schering-Plough to collaborate on the discovery and
commercialization of oral thrombin inhibitor drugs for the prevention and
treatment of chronic cardiovascular disorders. The remaining $354,000 of
revenue from collaborative agreements, and an additional $500,000 in license
fees, is attributable to the Company's research and option agreement initiated
in October 1995 with Pfizer to collaborate on the development of neutrophil
inhibitory factor, an anti-inflammatory agent with therapeutic potential for
stroke and other indications. Revenue from product sales increased to $406,000
in 1995, compared to $280,000 and $323,000 in 1994 and 1993, respectively. The
majority of product sales were made under agreements with Ortho, whereby Ortho
acquired worldwide rights to produce and distribute a Corvas product for
diagnostic use in determining the blood clotting ability of patients. In order
to maintain its rights pursuant to these agreements, Ortho is required to make
minimum annual purchases of materials, royalty payments, and one additional
milestone payment. These revenue increases were partially offset by a decrease
in research grants revenue. No revenue from research grants was recorded in
1995, compared to $667,000 in 1994 and $192,000 in 1993. This decrease results
from closing the Belgian subsidiary, which received the majority of the grant
revenue.

Research and development expenses decreased to $9,723,000 in 1995, from
$11,378,000 in 1994 and $12,115,000 in 1993. Research and development expenses
accounted for 78% of the total costs and expenses in 1995, 68% in 1994 and 79%
in 1993. This decrease in 1995, primarily due to the closure of the Belgian
subsidiary, was partially offset by an increase in clinical trial, preclinical
development and medicinal chemistry costs. The decrease in 1994 was caused by
the recording of two one-time charges in 1994: a restructuring charge of
$1,575,000 pursuant to closing the Belgian subsidiary, and a charge of $535,000
for settlement of stockholder litigation.

General and administrative expenses decreased to $2,582,000 in 1995, from
$3,159,000 in 1994 and $3,067,000 in 1993. Major factors contributing to the
decrease in 1995 include decreased administrative headcount and the final
charges for deferred compensation expense related to certain options granted
prior to the Company's initial public offering.

Total other income was $821,000 in 1995, $697,000 in 1994 and $1,073,000 in
1993. The increase from 1994 to 1995 was primarily attributable to higher
investment balances available as a result of the equity and research funding
received from Schering-Plough in December 1994.

Subject to the availability of additional capital, the Company expects that
all expenses will increase over the next several years as the Company's research
and development programs progress. However, due to revenue expected to be
recognized pursuant to the Company's collaborative agreements, operating losses
are not expected to increase significantly, if at all, in 1996 beyond the 1995
amount.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), effective for fiscal years beginning after December
15, 1995. SFAS 123 establishes the fair value based method of accounting for
stock-based compensation arrangements, under which compensation cost is
determined using the fair value of the stock option at the grant date and the
number of options vested, and is recognized over the periods in which the
related services are rendered. The Company will adopt SFAS 123 using the pro
forma disclosure method.

20.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Since inception, the Company has financed its operations primarily through
private placements of convertible preferred stock, the initial public offering
of common stock, a private placement of equity securities, interest income
earned on cash and investment balances, and revenues from collaborative
agreements, research grants and license agreements. On February 2, 1996, the
Company completed a private placement of equity securities consisting of
3,000,000 units, resulting in proceeds of $14,835,000, net of estimated issuance
costs. Each unit consisted of one share of common stock and one callable
warrant to purchase one additional share of common stock. The Company's
principal sources of liquidity are its cash and cash equivalents, time deposits
and debt securities which, net of a restricted time deposit of $60,000, totaled
$24,848,000 as of March 31, 1996. Working capital at March 31, 1996 was
$21,570,000. Available cash is invested in accordance with an investment policy
set by the Board of Directors, which has the objective to maximize income with
preservation of principal and maintenance of adequate liquidity. The policy
provides guidelines concerning the quality, term and liquidity of investments.
The Company presently invests its excess cash in U.S. government securities.

The Company expects to incur substantial additional costs in the
foreseeable future, including costs related to sustaining and possibly expanding
research and development activities and preclinical and clinical testing, and
that such costs will continue to increase. As a result, the Company expects it
will experience substantial additional operating losses over the next several
years. With the cash infusion from the recent private placement, the Company
believes its existing capital resources and interest earned thereon will be
adequate to satisfy its capital requirements into 1998. In addition, the
Company may also receive milestone payments and royalties on sales of products
resulting from its alliances. However, there can be no assurance that products
will be successfully developed and commercialized or that the Company will
receive any such amounts under these alliances.

The Company's future capital requirements will depend on many factors,
including, but not limited to, the following factors: continued scientific
progress in its drug discovery programs; the magnitude of these programs;
progress of preclinical testing and clinical trials; the time and costs involved
in obtaining regulatory approvals; the costs involved in filing, prosecuting,
maintaining and enforcing patent claims; competing technological and market
developments; changes in its existing research relationships; the ability of the
Company to establish and maintain collaborative or licensing arrangements; the
cost of manufacturing scale-up; and effective commercialization activities and
arrangements. The Company leases its laboratory and office facilities and
certain equipment under operating and capital leases. It is expected that the
Company will need to acquire additional property and equipment as research and
development activities progress. The Company anticipates the need for expansion
of its laboratory and office facilities over the next several years.

The Company's business is subject to significant risks, including but not
limited to the risks associated with its research and development efforts,
obtaining and enforcing patents, the lengthy and expensive regulatory approval
process, product reimbursement levels, competition from other products,
dependence on collaborative partners and other third parties, and the
availability of capital. Even if the Company's products appear promising at an
early

21.

<PAGE>

stage of development, they may not reach the market for a number of reasons.
Such reasons include the possibilities that the potential products: will be
ineffective or found to be unsafe during clinical trials, will fail to receive
necessary regulatory approvals, will be difficult to manufacture on a large
scale, will be uneconomical to market or will be precluded from
commercialization by proprietary rights of third parties.

Uncertainties associated with the duration and expense of preclinical and
clinical testing of any of the Company's products make it difficult to predict
the Company's capital requirements, and unexpected developments and/or
regulatory requirements could greatly increase the cost of development of such
products and affect the timing of anticipated revenues from product sales.
Failure by the Company to obtain regulatory approval for any product will
preclude its commercialization. In addition, failure by the Company to obtain
patent protection may make certain of its products commercially unattractive.

To continue its product development efforts, the Company will be required
to raise substantial additional funds through public or private sales of its
securities and through collaborative arrangements. The Company's ability to
raise additional funds through such sales of securities depends in part on
investors' perceptions of the biotechnology industry in general and of the
Company in particular. The market for biotechnology company stocks has
historically been highly volatile and, accordingly, there can be no assurance
that additional funding will be available, or, if available, that it will be
available on acceptable terms. The Company is seeking to enter into additional
collaborative relationships to support development and commercialization under
which rights to certain of its technologies or products will be granted. There
can be no assurance that the Company will be able to conclude such relationships
on satisfactory terms, if at all, or that agreements with its collaborators will
successfully reduce its funding requirements. In addition, the Company has no
established bank financing arrangements, and there can be no assurance that it
will be able to establish such arrangements on satisfactory terms, if at all.
If adequate funds are not available, the Company may be required to
significantly delay, scale back or eliminate one or more of its drug discovery
programs or obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, product candidates or products that the Company would not
otherwise relinquish.

At December 31, 1995, the Company had available net operating loss
carryforwards of approximately $37,368,000 for federal income tax reporting
purposes which begin to expire in 2002. The net operating loss carryforwards
for state purposes, which began to expire in 1995 and fully expire in 2000, are
approximately 50% of the federal tax amounts. The Company has unused research
and development tax credits for federal income tax reporting purposes of
$2,314,000 at December 31, 1995. In accordance with Internal Revenue Code
Section 382, the annual utilization of net operating loss carryforwards and
credits existing prior to a change in control may be limited.

The Company, several of its current and former directors, and Centocor,
Inc. were parties to a legal proceeding filed February 18, 1993 in the U.S.
District Court for the Southern District of California. The complaint was filed
by a stockholder of the Company who represented a class of persons who purchased
Corvas stock from January 30, 1992 through April 14, 1992. A settlement was
agreed upon and judgment of the Court entered on August 28, 1995. Upon final
determination of allocations of stock to approved claimants, the remaining
Corvas settlement amounts were distributed in May 1996. The Company continues
to deny all claims of wrongdoing and maintains this denial as part of the
settlement agreement. Of the $535,000 charge recorded in 1994 related to this
settlement, $193,000 remains accrued at March 31, 1996. See "Business - Legal
Proceedings."

In 1993, the U.S. Patent and Trademark Office declared an interference and
is currently in the process of determining the priority of invention between a
patent for which some rights are licensed to the Company and a patent
application for which rights are licensed to another party. The subject matter
of these licenses is recombinant tissue factor which is used by Ortho to
determine the blood clotting abilities of patients. The Company believes that
its licensed patent should be upheld and is contesting the other party's claims
of prior invention. However, there can be no assurance that such patent will be
upheld. See "Business - Legal Proceedings."

22.

<PAGE>

BUSINESS

EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN THIS SECTION, AS WELL AS
THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Corvas is a biopharmaceutical firm engaged in the design and development of
a new generation of therapeutic agents in the fields of thrombosis and
inflammation. The Company seeks to develop and commercialize novel drugs for
the improved treatment and prevention of major cardiovascular diseases, such as
heart attack, stroke, deep vein thrombosis, pulmonary embolism, and acute
inflammation associated with trauma, shock and reperfusion injury in stroke. In
contrast to currently available therapies, the Company's candidate drugs are
designed to intervene more specifically in the disease process. Corvas intends
to develop both parenteral and oral drugs to treat patients who cannot be
optimally treated with current therapeutics. The Company believes that its
antithrombotic drug discovery and development program is among the most
comprehensive in the industry and that, together with its alliance partner, it
is well positioned to develop and commercialize orally-active antithrombotic
agents.

Corvas' scientists are experienced in a wide range of disciplines which are
all integrated in a systematic discovery approach. Current programs employ
medicinal chemistry, peptide chemistry, computer-aided drug design, structural
biology, molecular biology, biochemistry, physiology, and pharmacology
competencies. The Company's programs are based on three technology platforms:
structure-based drug design, biological discovery, and molecular pharmacology.
The first two platforms generate drug leads, while the third technology platform
enables the selection of drug candidates.

The Company has several antithrombotic compounds in clinical and
preclinical development, including orally-active thrombin inhibitors, which are
being developed in collaboration with Schering-Plough. Corvas has developed a
portfolio of orally-active, potent and selective thrombin inhibitors upon which
this alliance is based. In the second half of 1995, Corvas conducted an initial
human safety study of CVS-1123, a lead orally-active thrombin inhibitor. In
this Phase Ia study, CVS-1123 demonstrated oral activity and was well tolerated.
Corvas and Schering-Plough are actively evaluating a series of follow-on
compounds in the same chemical class in order to select a candidate for
development by Schering-Plough. This selection is expected to be made by the
end of 1996. See "Business - Strategic Alliances - Relationship with Schering-
Plough."

23.

<PAGE>

Corvas is also conducting active discovery programs for inhibitors of
coagulation Factor Xa and Factor VIIa/TF. The primary goal of these programs
is the development of safe and effective orally-active drugs. A secondary goal
has been the development of parenteral agents targeting these factors. In 1994,
Schering-Plough acquired an option to expand its alliance with Corvas to include
Factor Xa inhibitors. In January 1996, Schering-Plough made a $1,000,000
payment to extend its option rights until December 1996. See "Business -
Strategic Alliances - Relationship with Schering-Plough."

In its anti-inflammatory program, the Company has discovered a promising
novel protein, NIF, which blocks certain white blood cell functions associated
with inflammation. In 1995, initial studies demonstrating the potential of NIF
as a therapy for stroke victims were presented at a scientific conference by
Corvas collaborators and published in a leading journal. Based on these early
results, the Company entered into an agreement with Pfizer to collaborate on the
development of NIF. See "Business - Strategic Alliances - Relationship with
Pfizer."

In 1992, Corvas entered into an alliance with Ortho to develop and
commercialize a laboratory test for blood clotting function based on Corvas'
proprietary technology. Corvas supplies a critical raw material, recombinant
human tissue factor, to Ortho and has licensed rights to Ortho. Ortho currently
produces and markets prothrombin time reagents based on such technology. See
"Business - Strategic Alliances - Relationship with Ortho Diagnostic Systems."

With regard to the foregoing discussion of the Company's research and
development programs, there can be no assurance that either the underlying
science or the related research and development being conducted will
successfully yield approved clinical products. Such research and development
efforts are subject to failure at any time.

BUSINESS STRATEGY

Corvas was formed to discover and develop novel pharmaceutical products for
the improved treatment and prevention of acute and chronic cardiovascular
diseases, inflammatory diseases, and related vascular disorders, including deep
vein thrombosis, pulmonary embolism, heart attack, unstable angina, atrial
fibrillation, and stroke. The Company believes that it has established a
leadership position in the discovery and development of antithrombotic agents -
drugs which prevent the formation of blood clots - and particularly in the
design of oral drugs which have significant clinical and commercial potential.
The Company is also pursuing the development of new parenteral antithrombotic
agents based on recent discoveries.

Key elements of the Company's strategy include the following:

* FOCUS ON ANTITHROMBOTIC DRUGS, A HIGH GROWTH SECTOR IN THE LARGE
CARDIOVASCULAR MARKETPLACE.

Corvas is developing a portfolio of antithrombotic drug candidates,
directed at three molecular targets, for multiple clinical indications
and routes of administration. The Company believes that its program
to develop blockers of blood coagulation enzymes is among the most
comprehensive in the industry.

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* EXPAND ITS LEADERSHIP POSITION IN INHIBITION OF SPECIFIC PROTEASES AND
RECEPTORS INVOLVED IN THROMBOSIS AND RELATED DISEASE MECHANISMS.

Corvas has focused on antithrombotic drugs to exploit the potential
that has been created by advances in understanding the biology of the
disease and new molecular discovery technologies. The blood
coagulation enzymes are members of a structurally-related class of
serine proteases. Corvas believes it has achieved a leading position
in the development of orally-active inhibitors of thrombin
(CORTHROMBIN compounds). Advances made in this specific program, and
other proprietary technologies, are being leveraged by application to
other targets in the same family, including Factor Xa and Factor
VIIa/TF.

* INTEGRATE DRUG DISCOVERY METHODOLOGIES WITH BIOLOGICAL EVALUATION FOR
RAPID ITERATION OF DEVELOPMENT CANDIDATES.

Company scientists are experienced in a wide range of disciplines
which are all integrated in a systematic discovery approach. Active
programs exploit medicinal chemistry, peptide chemistry, computer-
aided drug design, structural biology, molecular biology,
biochemistry, physiology, and pharmacology competencies. The
Company's programs are based on three technology platforms: structure-
based drug design, biological discovery, and molecular pharmacology.
Structure-based drug design programs are the source of small molecule
drugs, including those possessing oral activity. Biological discovery
methods, including novel gene discovery, cloning, expression, and
mutagenesis methods are used to identify novel biologicals as drug
candidates and discovery tools. Molecular pharmacology techniques,
including IN VITRO biochemical analysis and IN VIVO biological
testing, are used to rigorously characterize the many drug leads in
order to select specific drug candidates for preclinical and clinical
development.

* ESTABLISH A STRONG PORTFOLIO OF PATENTS AND PROPRIETARY TECHNOLOGY.

Corvas has adopted a proactive policy of filing and prosecuting patent
applications claiming a range of inventions, including uses and
methods of synthesis of new molecules, discovery methods, novel genes
and gene products, and novel analytical reagents. Corvas has entered
into selected agreements to license enabling technology from third
parties and intends to seek rights to additional external technology
on an ongoing basis to complement internal discovery efforts. See
"Business - Patents and Proprietary Rights."

* ENTER INTO STRATEGIC ALLIANCES WITH ESTABLISHED PHARMACEUTICAL FIRMS
FOR PRODUCTS TARGETED AT CHRONIC INDICATIONS.

Corvas has established an initial alliance for chronic care products
based on oral thrombin inhibitors (CORTHROMBIN compounds) with
Schering-Plough. This relationship may be expanded, at Schering-
Plough's option, to include Factor Xa inhibitors (CORDECIN compounds).
See "Business - Strategic Alliances - Relationship with Schering-
Plough." The Company intends to establish additional alliances to
access resources to support the development and commercialization of
other chronic care products.

* RETAIN/EXPLOIT U.S. RIGHTS TO SELECTED ACUTE CARE PRODUCTS WHEN
CONSISTENT WITH THE FIRM'S FINANCIAL RESOURCES AND EXPECTED RETURN ON
STOCKHOLDER INVESTMENT.

Corvas plans to seek to retain exclusive rights, joint
commercialization rights, or co-promotion rights to selected acute
care products for the U.S. market when exploiting such rights is
feasible and is expected to provide an appropriate economic return,
balancing the resources required and risks involved. Based on this
strategy, the Company formed an alliance with Pfizer to develop and
commercialize NIF as a therapy for stroke. See "Business - Strategic
Alliances - Relationship with Pfizer." More recently, the Company has
commenced the development of a product candidate from the NAP family.
Corvas plans to seek one or more partners to aid in the development of
this product and plans to participate in the development and
commercialization of such product in the U.S.

25.

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* EXPAND PRODUCT PORTFOLIO BY APPLICATION OF TECHNOLOGY TO DISEASE
TARGETS OUTSIDE THE ANTITHROMBOTIC DRUG FIELD.

The Company's technology platforms may be broadly applied to the
discovery and development of inhibitors of new serine proteases. In
the course of conducting its antithrombotic program, proprietary
chemical methods for inhibiting such enzymes have been discovered.
The Company is currently adapting these chemical methods to
combinatorial chemistry formats to increase the speed and economy of
new lead discovery and to strengthen its ability to expand the number
of target enzymes in its portfolio. The computational chemistry and
drug design technology resident at Corvas also permits the expansion
and leveraging of the firm's existing portfolio. Expansion areas
being targeted include inflammation and oncology, in which specific
proteases play key roles in physiology.

The Company also plans to explore the application of its tissue factor
technology beyond the current use as a laboratory diagnostic reagent.

BACKGROUND

Thrombosis and inflammation are closely linked pathologic processes
employed by the body to protect itself against injury. When these processes are
excessively or inappropriately activated, the processes themselves can result in
significant tissue injury, disease and death.

THROMBOSIS

The formation of a blood clot, or thrombus, in the body results from a
complex cascade of biochemical events involving the blood coagulation proteins
and blood platelets. Although blood clot formation is a normal vascular repair
mechanism, when this mechanism is activated within a blood vessel, local
thrombosis may result and occlude the blood vessel. Vascular diseases
associated with thrombosis afflict more than 3,000,000 individuals annually in
the U.S. and are the causes of significant mortality and morbidity associated
with cardiovascular diseases.

Thrombosis causes several significant diseases characterized by the
location of the blood vessel where the thrombus is lodged. For example, acute
myocardial infarction ("MI") results from obstruction of blood flow due to a
thrombus in a coronary artery which supplies blood to the heart muscle; stroke
or transient ischemic attacks ("TIA") may result from a thrombus in an artery
which supplies blood to a part of the brain. Similarly, a clot in the deep
veins of the legs, called deep vein thrombosis ("DVT"), causes local
inflammation, pain and other complications, including the dislodgment of part of
the thrombus which can travel to the lungs and result in life-threatening
pulmonary embolism ("PE"). Thrombosis can also be generalized, with
microthrombus formation occurring throughout the vascular system. This
condition, known as disseminated intravascular coagulation ("DIC"), is a
consequence of cancer and various infectious diseases, including sepsis, and may
result in depletion of blood coagulation factors, multiple organ failure,
hemorrhage and death.

Activation of the thrombotic mechanisms contributes to unstable angina
("UA") or serious chest pain and atrial fibrillation ("AF") or rapid,
uncontrolled heart muscle contractions. Patients with UA are at significant
risk of Ml, and patients with AF are at significant risk of Ml and stroke due to
enhanced risk of thrombosis. Patients with TIA are also at risk of stroke.
Finally, DVT and PE can arise from complications of vascular surgery such as
major orthopedic surgery.

Two classes of antithrombotics are presently in clinical use:
anticoagulants and antiplatelet agents. In the U.S., heparins and warfarin are
the only drugs currently approved for use as anticoagulants. Aspirin is the
most commonly used antiplatelet agent, although the first in a new class of
antiplatelet agents, GPIIb/IIIa antagonists, has been recently introduced to the
market. Although these drugs are widely prescribed, they have significant
limitations. Heparins, which act by an indirect mechanism, can cause excessive
bleeding and decreased platelet count (thrombocytopenia) and can be administered
only by injection. Recently, low molecular weight heparins have been introduced
in the U.S. These agents may be injected subcutaneously and routine monitoring
of coagulation function is no longer required. These advantages have led to
adoption for certain indications, yet low molecular

26.

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weight heparins still suffer from many of the limitations of traditional
heparins. Warfarin lacks specificity of action, may cause bleeding, must be
carefully monitored and, due to its slow onset of action, is unsuitable for use
as an acute antithrombotic drug. Aspirin also has a slow onset of action and
its effect is reversed by the natural production of new blood platelets, a
process that takes seven to eleven days. In addition, chronic administration of
aspirin carries the risk of gastrointestinal bleeding and hemorrhagic stroke.
Currently, GPIIb/IIIa antagonists can be administered acutely by intravenous
routes and must be used with an anticoagulant such as heparin. These and other
factors limit the use of the currently available antithrombotic drugs,
especially on a chronic basis. As there are no selective orally-active
thrombin, Factor Xa or Factor VIIa inhibitors presently available, the compounds
under development at Corvas aim to address unmet needs in antithrombotic
therapy.

The worldwide market for antithrombotic agents is estimated to be greater
than $2,000,000,000, based on 1994 market audits. Approximately half of the
sales are in each of the antiplatelet and anticoagulant categories. According
to these market audits, 1994 U.S. sales of anticoagulants were greater than
$440,000,000. Of this total, approximately $300,000,000 was contributed by the
sales of COUMADIN-Registered Trademark-, the DuPont-Merck brand of warfarin.

Sales of COUMADIN have been growing in recent years due to adoption by many
physicians for two newly approved indications: treatment of patients with AF for
prevention of stroke and prevention of recurrent MI. Treatment guidelines
issued by the American College of Chest Physicians ("ACCP") in October 1995
recommend the use of oral anticoagulation to decrease the risk of stroke. Yet
federal government agency estimates are that only 25% of AF patients are
currently treated with oral anticoagulants. Based on interviews with
clinicians, the Company believes that this is primarily because physicians fear
the bleeding complications of COUMADIN.

Approximately $140,000,000 of the U.S. anticoagulant sales reported in
1994 are in the parenteral category and comprise the traditional heparins and
new low molecular weight heparin. In 1994, sales of LOVENOX-Registered
Trademark-, the first low molecular weight heparin introduced in the U.S.
by Rhone-Poulenc Rorer ("RPR"), reached $38,000,000. RPR has reported that
sales of LOVENOX and related brands exceeded $300,000,000 worldwide in 1995.
LOVENOX is primarily indicated for prophylaxis of venous thrombosis in major
orthopedic surgery, such as hip and knee replacement. In October 1995,
treatment guidelines for use of anticoagulation as prophylaxis to prevent
deep vein thrombosis were also issued by the ACCP. PE resulting from DVT is
estimated to be the most frequent cause of preventable in-hospital deaths.
It is estimated that increased prophylaxis with low molecular weight heparins
will reduce the risk of fatal pulmonary embolism in major orthopedic
procedures. A second low molecular weight heparin, FRAGMIN-TM-, was recently
approved in the U.S. for use as therapy in major abdominal surgery.

The Company believes the large number of patients affected by thrombotic
and associated vascular diseases, together with the limited efficacy of, and
adverse side effects associated with, existing surgical procedures and drug
therapies, provides significant market opportunities for new drugs. The recent
growth in sales in the antithrombotic drug category supports the view that
physicians are adopting new agents in search of better therapeutic outcomes and
economics. Corvas is building on recent scientific advances in the
understanding of the mechanisms of blood clot formation and is developing new
therapeutics designed to intervene more specifically in the disease process to
result in drugs which the Company believes will offer important economic and
therapeutic advantages over existing therapy.

INFLAMMATION

Inflammation is a response by the body to injury and infection. The
diverse inflammatory responses are mediated by a series of molecular events,
known as the inflammatory cascades, by which the body attempts to limit or
destroy the injurious agents, heal wounds and maintain health. However,
inflammatory responses can result in significant tissue injury and disease. A
primary event in a major class of inflammatory response is the attachment, or
adhesion, of neutrophils, a specific type of white blood cell, to endothelial
cells which line the blood vessel walls. Adhesion is caused by the interaction
of specific receptors on the neutrophils with target adhesion molecules on the
endothelial cells. After adhesion occurs, the neutrophils migrate across the
lining of the blood vessel and into the tissue where they release toxic
substances, which contribute to tissue damage. These events occur in both acute
and chronic inflammatory conditions. Acute disorders which are often
accompanied by this inflammatory response

27.

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include stroke, traumatic shock and many forms of reperfusion injury which can
occur following certain surgical procedures such as aortic aneurysm repair,
artery bypass grafting and major abdominal surgery.

Current anti-inflammatory drugs generally seek to alleviate symptoms rather
than intervene in the underlying disease processes. Blocking the activation and
adhesion of white blood cells to endothelial cells, and thereby preventing their
accumulation in tissue, is an alternate approach which could more effectively
intervene early in the inflammatory process. Using advanced understanding of
the underlying mechanisms of inflammation and tissue injury, Corvas is seeking
to develop new anti-inflammatory agents designed to intervene early in the
disease process and provide improved efficacy and safety. The Company is
focusing its NIF program on the development of a protein drug that will inhibit
neutrophil activation, adhesion and transmigration into brain tissue to
attenuate and prevent injury following stroke and head trauma. The Company
believes this approach may lead to a new drug for the treatment of stroke
victims, for whom no effective therapy exists.

INTEGRATED TECHNOLOGY PLATFORMS

In its drug discovery programs, Corvas applies a highly integrated,
multidisciplinary approach to produce novel molecules as both drug discovery
tools and drug candidates. The Company's medicinal chemistry expertise is
essential to the development of synthetic pharmaceuticals and is supported by
its capabilities in protein engineering, biochemistry, immunology, monoclonal
antibody technology, analytical chemistry, animal pharmacology, molecular
modeling and IN VITRO and IN VIVO biological testing. In addition, the Company
has developed combinatorial chemistry approaches which have yielded lead
compounds for its antithrombotic program. The Company believes these
technologies have potential application to the discovery of drug candidates in
other therapeutic fields.

STRUCTURE-BASED DRUG DESIGN

Corvas scientists have extensive knowledge and experience in computer-aided
drug design and have developed novel, proprietary software to expedite the
protein-based design of synthetic drugs. Using computer-aided molecular
modeling techniques, Company scientists have developed models of the active
sites of serine proteases and have gained valuable insights regarding the unique
features of specific targets. Corvas has also used computer modeling to study
the interaction of candidate drugs with target enzymes. In addition, through
collaboration with university-based scientists, Corvas has obtained X-ray
crystal structures of candidate drugs bound to the active site of the target
enzyme thrombin. Crystal structures of Corvas inhibitors bound to Factor Xa and
Factor VIIa/TF are also being determined. By systematic iterative synthesis,
biological evaluation and modeling, Company scientists have developed a
comprehensive database correlating biological activity of candidate drugs with
their structures.

The Company has developed several proprietary chemical strategies for
inhibiting serine protease enzymes using a concept known as "transition state
analog inhibition." In this approach, an inhibitor is synthesized which mimics
the "transition state" structure that is intermediate between that of the
enzyme's substrate and its product. By exploiting this principle, Company
scientists have produced inhibitors of three enzymes in the coagulation cascade
and several other targets outside of thrombosis. The resulting inhibitors bind
reversibly, but tightly, to the target enzyme and have been shown to exhibit
excellent pharmacologic properties.

Company scientists are currently combining certain Corvas proprietary
inhibitor chemistry with recently developed methods of combinatorial chemistry
to create methods of producing large libraries of candidate inhibitors. It is
expected that such methods, if successfully developed, will improve the speed of
lead identification efforts and enable the Company to more rapidly expand its
portfolio to new target enzymes.

BIOLOGICAL DISCOVERY

Natural products have been a source of new drugs for many years. Advances
in molecular biology permit the search for, and identification of, new
biological activities in a variety of sources if appropriate analytical assays
exist. A secondary discovery strategy used by Corvas scientists has been to
examine blood-feeding parasites which infect mammals as a source of
biologically-active agents which can serve as mechanistic probes and potential
drug

28.

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candidates. Using specialized assays of coagulation enzyme and white blood cell
activity, Corvas scientists have discovered natural molecules which inhibit
certain blood coagulation enzymes and certain white blood cell functions. These
molecules, from the NAP and NIF families, are further described below.
Techniques used to discover these molecules include classical protein
fractionation and activity purification as well as gene cloning techniques,
including specialized expression cloning methods developed by Corvas scientists.
The study of the structure and function of molecules evolved by nature to
perform specialized biochemical functions often yields novel insights into
molecular mechanisms. Such studies have provided competitive advantages to
Company scientists which are being applied in its small molecule drug discovery
programs. The Company anticipates using its biological discovery competence to
identify molecules that act on new drug discovery targets and to identify novel
targets for future discovery programs as well.

MOLECULAR PHARMACOLOGY

Using the two platform technologies described earlier, Company scientists
seek to generate many lead molecules which must be rigorously evaluated to
determine their suitability as drug candidates for further preclinical and
clinical development. This evaluation process relies on Corvas' expertise in
molecular pharmacology. Corvas has evolved a highly specialized capability to
evaluate leads for selection as candidate antithrombotic and related drugs.
Such expertise depends on a unique blend of IN VITRO biochemical and IN VIVO
biological techniques, with testing in both small and large laboratory animal
models of disease processes. Selection of candidates from leads depends on the
specific intended use and route of administration of a drug. Company scientists
are highly experienced in evaluating molecules for bioavailability by various
routes of administration, including the oral, intravenous and subcutaneous
routes. To complement its internal resources in physiology and pharmacology,
the Company has conducted numerous animal studies in collaboration with outside
investigators, primarily in academic settings, who provide specialized models
and comparative data bases which are critical to the drug selection process.

PRODUCT DEVELOPMENT PROGRAMS

The following table describes the Company's primary drug development
programs and their potential therapeutic indications and development status.
There can be no assurance that the Company's product development efforts will
progress any further or be successfully completed. In addition, there can be no
assurance that the Company's potential products will be capable of being
produced in commercial quantities at reasonable costs, that required regulatory
approvals can be obtained or that any potential products, if introduced, will be
successfully marketed or achieve market acceptance.

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PROGRAM/MOLECULAR TARGET THERAPEUTIC INDICATIONS(1) DEVELOPMENT STATUS(2)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
ANTITHROMBOTIC

CORTHROMBIN COMPOUNDS/THROMBIN
Oral(3) DVT, PE, UA, stroke, AF Phase Ia trial completed in 1995; Schering-Plough expected to
start Phase I trial in 1997
CORDECIN AS COMPOUNDS(4)/FACTOR Xa

Parenteral (NAP-5) MI, UA, DVT, PE Preclinical development

Oral Post-MI, UA, stroke, AF, DVT Lead evaluation/Preclinical development

CORSEVIN AS COMPOUNDS/FACTOR VIIa/TF

Parenteral (NAPc2) DVT, PE, UA Preclinical development

Oral Post-MI, prevention of Lead discovery
cardiovascular disease,
UA, stroke, AF

CORSEVIN M(5)/FACTOR VIIa
Antithrombotic Phase Ib clinical trials

ANTI-INFLAMMATORY

NIF(6) Stroke, reperfusion injury Preclinical development with Pfizer

</TABLE>

________________

(1) The following abbreviations are used in the table: AF=atrial fibrillation;
MI=myocardial infarction; DVT=deep vein thrombosis; PE=pulmonary embolism;
UA=unstable angina.
(2) The following definitions apply to the table: "Lead
discovery"=Identification of lead compounds with activity in appropriate IN
VITRO assay systems. These lead compounds may require additional chemical
manipulation and more extensive evaluation prior to selection of
candidates, if any, for preclinical development. "Lead
evaluation"=Extensive evaluation of lead compounds in multiple IN VITRO
assay systems and preliminary animal pharmacology studies. "Preclinical
development"=Conduct of specific studies to support clinical testing. See
"Business - Government Regulation" for a description of the clinical trial
process.
(3) Oral CORTHROMBIN has been licensed to Schering-Plough. See "Business -
Strategic Alliances - Relationship with Schering-Plough."
(4) Schering-Plough has an exclusive option until December 1996 for CORDECIN AS
compounds. See "Business - Strategic Alliances - Relationship with
Schering-Plough."
(5) CORSEVIN M has been licensed to Centocor. See "Business - Strategic
Alliances - Relationship with Centocor."

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(6) NIF is subject to an option by Pfizer to take an exclusive license to the
product and related technology. See "Business - Strategic Alliances -
Relationship with Pfizer."

ANTITHROMBOTIC PROGRAM

Currently available antithrombotic agents, despite their limitations, are
used in a diverse range of clinical indications. In clinical practice, multiple
antithrombotic drugs are often administered concurrently, and it is expected
that drugs under development by Corvas may also be used in multidrug regimens.
The Company has therefore adopted a broad approach in its antithrombotic
program, targeting intervention at three key biochemical steps, in order to
develop agents for multiple clinical indications. Corvas is developing
compounds which inhibit Factor VIIa/TF, Factor Xa and thrombin, and believes
that these drugs may have advantages over currently available antithrombotic
drugs and over certain other antithrombotic drugs under development. As
additional preclinical and clinical data are obtained, the Company expects to
select optimal compounds for further development in specific clinical
indications, either as parenteral or oral drugs. The Company believes that its
program targeting the inhibition of the key coagulation enzymes is among the
most comprehensive in the industry and that it has achieved a leading position
in the design and development of orally-active antithrombotic agents.

CORTHROMBIN COMPOUNDS. Corvas has developed highly potent and selective
small molecule inhibitors of thrombin, a key blood enzyme that produces fibrin
and causes platelet aggregation. Fibrin and platelets are the two major
components of a blood clot. In December 1994, Corvas entered into a strategic
alliance with Schering-Plough to develop and commercialize oral thrombin
inhibitor drugs. See "Business - Strategic Alliances - Relationship with
Schering-Plough." Corvas has developed a strong portfolio of orally-active
thrombin inhibitors upon which this alliance is based. Lead compounds in
several classes have been identified for further development and are being
actively studied in animals and in early human testing. In the second half of
1995, Corvas conducted an initial human safety study of CVS-1123, a lead orally-
active thrombin inhibitor. In this Phase Ia study, CVS-1123 demonstrated oral
activity and was well tolerated. The Company presented the first results of
the Phase Ia clinical trial at a scientific meeting in April 1996. Corvas
and Schering-Plough are actively evaluating a series of follow-on compounds
in the same chemical class as CVS-1123 in order to select a drug candidate
for development by Schering-Plough. This selection is expected to be made by
the end of 1996, upon which Schering-Plough will make a $3,000,000 milestone
payment. Corvas has filed a series of patent applications covering novel
thrombin inhibitor structures, chemical strategies for inhibiting thrombin
and related enzymes, and methods of treating thrombosis with such inhibitors.
The Company believes that it has and will continue to establish a strong
patent position in the field of thrombin inhibitors. See "Business - Patents
and Proprietary Rights."

CORDECIN AS COMPOUNDS. Corvas is developing synthetic inhibitors of Factor
Xa. Progress has been made in the identification of potent and specific Factor
Xa inhibitors in IN VITRO assay systems and in IN VIVO animal models, including
compounds which exhibit oral activity in rodent models of thrombosis and oral
bioavailability in conscious dogs. Research activities are focused on continued
refinement of these molecules to identify suitable preclinical candidates. As
part of the strategic alliance with Schering-Plough to develop and commercialize
oral antithrombotic drugs, Schering-Plough has obtained an exclusive option for
CORDECIN through December 1996. See "Business - Strategic Alliances -
Relationship with Schering-Plough."

CORSEVIN AS COMPOUNDS. Corvas has designed, synthesized and evaluated a
large number of proprietary synthetic compounds which inhibit the activity of
Factor VIIa/TF. Additional medicinal chemistry research and pharmacology
testing is ongoing to refine these molecules and further improve their potency
and selectivity. The Company intends to seek a strategic alliance to support
the development of Factor VIIa/TF inhibitors for chronic therapy.

NAP FAMILY. In addition to the chemistry-based approach described above,
Corvas scientists have recently discovered a unique family of small protein
inhibitors of Factors Xa and VIIa/TF. These NAP proteins were discovered from
blood-feeding hookworms, parasites which have evolved efficient anticoagulation
mechanisms.

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Based on comparative data developed both in the Company's laboratories and
with collaborators, the Company believes that these agents exhibit
unprecedented antithrombotic potency in animal models. In addition, animal
studies demonstrate that NAP proteins may be administered by the subcutaneous
route, and assuming that similar properties are demonstrated in humans, this
is expected to be an attractive competitive feature of these agents. The
discovery and characterization of a specific Factor Xa inhibitor, NAP-5, was
reported at scientific meetings in 1995, including the American Heart
Association, and was discussed in a full paper in the PROCEEDINGS OF THE
NATIONAL ACADEMY OF SCIENCES ("PNAS"). The cloning and characterization of a
novel Factor VIIa/TF inhibitor, NAPc2, is described in a second paper,
published on March 5, 1996 in PNAS. The Company plans to present additional
scientific results at meetings throughout 1996. Based on the preclinical
studies conducted to date, the Company has selected NAPc2 as a development
candidate and has commenced the necessary preclinical studies to bring NAPc2
to the clinic for initial human testing in early 1997. Initial clinical
trials and early Phase II efficacy studies are currently being designed. The
Company has engaged a contract manufacturer to produce the necessary clinical
supplies.

CORSEVIN M. Corvas has developed CORSEVIN M, a potent and specific
monoclonal antibody fragment. CORSEVIN M acts at the initial step of the
coagulation cascade by binding to coagulation Factor Vlla and neutralizing its
clot-forming activity. In 1993, the Company completed a Phase I clinical trial
of CORSEVIN M which it believes is the first specific inhibitor of the
initiation of the coagulation cascade to have been tested in humans. In Phase
Ia clinical trials, this compound showed potential as a safe, fast-acting,
potent and reversible anticoagulant. Because the Company is focusing its
resources on non-antibody based pharmaceuticals, it licensed this product to
Centocor. The Company has been advised that Centocor intends to continue the
development of CORSEVIN M and that Centocor is currently evaluating its future
development strategy for the agent in the light of the recent clinical trial
results with its antiplatelet agent REOPRO-TM-. The Company expects that
Centocor will conduct all future trials, if any, of CORSEVIN M. See "Business -
Strategic Alliances - Relationship with Centocor."

ANTI-INFLAMMATORY PROGRAM

NIF. Corvas is developing NIF, a protein which inhibits neutrophil
activation, adhesion and transmigration into tissue. Corvas scientists have
demonstrated that NIF interacts specifically with a cell adhesion receptor
(integrin) on the surface of neutrophils known as CD11b/CD18 (Mac-1). The
interaction of NIF with CD11b/CD18 blocks the adhesion of neutrophils to the
endothelial cells which line blood vessels, and thereby inhibits the first step
in the development of an inflammatory response. Corvas has produced multiple
recombinant forms of NIF, selected one form for preclinical development, and
demonstrated activity of the molecule in several animal pharmacology models of
acute inflammation. The Company believes that NIF is the first identified,
naturally-occurring inhibitor of CD11b/CD18, and that this novel molecule may
have application as an acute anti-inflammatory drug with safety and efficacy
advantages over current clinical therapy and other investigational agents.

NIF represents a potential parenteral acute-care anti-inflammatory product.
The Company has continued animal pharmacology studies of NIF, focusing on stroke
and reperfusion injury, in which earlier studies have shown NIF to be highly
effective. In 1995, initial studies demonstrating the potential of NIF as a
therapy for stroke victims were presented at a scientific conference by Corvas
collaborators and published in the ANNALS OF NEUROLOGY. Based on these early
results, the Company entered into a strategic alliance with Pfizer in October
1995 to collaborate on the development of NIF as a therapy for stroke and
head injury. In collaboration with Pfizer and an academic laboratory,
studies to evaluate the efficacy of NIF in animal models of stroke are
continuing. Additionally the Corvas-Pfizer collaboration is currently
focusing on the manufacture of additional supplies of NIF for toxicology
studies and early human studies. If the project proceeds on schedule,
initial human studies are planned for 1997. See "Business - Strategic
Alliances - Relationship with Pfizer."

DRUG DESIGN

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molecular modeling and IN VITRO and IN VIVO biological testing. In addition,
the Company has developed combinatorial chemistry approaches which have yielded
lead compounds for its antithrombotic program. The Company believes these
technologies have potential application for the discovery of drug candidates for
other therapeutic indications.

Corvas scientists also have extensive knowledge and experience in computer-
aided drug design and have developed novel, proprietary software to expedite the
protein-based design of synthetic drugs. Using computer-aided molecular
modeling techniques, Company scientists have developed models of the active
sites of serine proteases and have gained valuable insights regarding the unique
features of specific targets. Corvas has also used computer modeling to study
the interaction of candidate drugs with target enzymes. By systematic
synthesis, biological evaluation and modeling, Company scientists have developed
a comprehensive database correlating biological activity of candidate drugs with
their structures.

COMMERCIAL PRODUCTS

The Company has entered into two agreements with Ortho for manufacturing
and worldwide marketing by Ortho of diagnostic tests containing recombinant
human tissue factor produced by Corvas. See "Business - Strategic Alliances -
Relationship with Ortho Diagnostic Systems."

Corvas also supplies recombinant human tissue factor and a group of tissue
factor-specific monoclonal antibodies to a distributor for use in the research
market. Sales of these products have not been significant to date and are not
expected to be significant in the future.

STRATEGIC ALLIANCES

As part of the Company's strategy for the research, development and
commercialization of its products, the Company may enter into various
arrangements with corporate partners, licensors, licensees and others. Such
arrangements may include the grant of manufacturing, marketing or other rights.
There can be no assurance that any additional arrangements beyond those detailed
below will be established or that new products will be successfully developed
and commercialized under any existing alliances. If the Company is not able to
establish additional arrangements, it could encounter delays in developing its
products or find that the development, manufacture or sale of its products in
such markets is adversely affected. While Corvas believes that parties to any
such arrangements will have an economic motivation to succeed in performing
their contractual responsibilities, the amount and timing of resources they
devote to these activities will not be within the Company's control.

RELATIONSHIP WITH SCHERING-PLOUGH

In December 1994, the Company entered into a strategic alliance agreement
with Schering-Plough to collaborate on the discovery and commercialization of
oral thrombin inhibitor drugs for the prevention and treatment of chronic
cardiovascular disorders. The initial collaboration covers development of
inhibitors of thrombin, a key blood clotting enzyme. In addition, Schering-
Plough acquired an exclusive option (which was extended to December 1996 upon
payment of $1,000,000) to expand the program to include inhibitors of a second
significant blood coagulation enzyme, Factor Xa.

Under the terms of the agreement, Schering-Plough will compensate the
Company for the costs of research and preclinical development of thrombin
inhibitors over two years. Schering-Plough, which is responsible for certain
preclinical development, all clinical trials and regulatory activities, received
exclusive worldwide manufacturing and marketing rights for any resulting
thrombin inhibitors. The Company may also receive milestone payments and
royalties on sales of therapeutics resulting from this alliance. However, there
can be no assurance that products will be successfully developed and
commercialized under this alliance.

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has agreed to make an additional equity investment, as well as payments for
certain fees, research and development expenses, and regulatory milestones. To
date, Corvas has received a total of $14,000,000 from Schering-Plough under the
alliance.

Schering-Plough beneficially owns approximately 9.0% of the
outstanding securities of the Company on an as-converted basis.

RELATIONSHIP WITH PFIZER

In October 1995, the Company entered into a research and option agreement
with Pfizer to collaborate on the development of NIF. During the option period,
which concludes in October 1996 but may be extended by Pfizer until April 1997,
Pfizer will fund its own further development of NIF, including costs associated
with clinical trials. If Pfizer exercises its option by April 1997, pursuant to
a license and development agreement, Corvas will conduct certain development
activities for an additional two-year period and Pfizer will receive an
exclusive, worldwide license to further develop, manufacture and market NIF as a
therapeutic agent. If the option to enter into the license and development
agreement is exercised, Pfizer will pay the Company an additional license fee of
$1,000,000 and will compensate the Company for certain costs of research and
preclinical development of NIF over a two-year period. If products are
successfully commercialized from this agreement, the Company will also receive
milestone payments and royalty payments on product sales. However, there can be
no assurance that products will be successfully developed and commercialized
under this alliance.

RELATIONSHIP WITH ORTHO DIAGNOSTIC SYSTEMS

In June 1992, the Company entered into two agreements with Ortho for
manufacturing and worldwide marketing by Ortho of diagnostic tests containing
recombinant human tissue factor produced by Corvas. These tests are used to
determine the blood clotting ability of patients. European sales of this
product commenced in 1992 and sales in the U.S. commenced in 1993. In order to
maintain its rights pursuant to these agreements, Ortho is required to make
minimum annual purchases of materials, royalty payments, and one additional
milestone payment.

RELATIONSHIP WITH CENTOCOR

In November 1991, the Company entered into an agreement with Centocor in
which Corvas granted rights to Centocor to license and commercialize certain
monoclonal antibody products developed by Corvas. For one such monoclonal
antibody product, CORSEVIN M, Corvas completed a Phase Ia clinical trial in
1993. Centocor has informed the Company that it intends to continue the
development of CORSEVIN M. Corvas will depend on Centocor for the continued
development of CORSEVIN M and product sales. In 1994, Centocor terminated its
option rights to future monoclonal antibody products discovered or acquired by
the Company. The Company may receive a future milestone payment upon receipt of
certain regulatory approvals and royalties on product sales.

In connection with this alliance, Centocor purchased preferred stock
(subsequently converted to common stock) of the Company for an aggregate
purchase price of $9,250,000. In connection with a lawsuit brought against
Corvas, several of its directors and Centocor, Centocor transferred 600,000 of
its Corvas shares towards the settlement during 1995. See "Business - Legal
Proceedings." On an as-converted basis, Centocor presently beneficially owns
approximately 4.9% of the outstanding securities of the Company.

RESEARCH COLLABORATIONS AND LICENSES

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PATENTS AND PROPRIETARY RIGHTS

The Company's success will depend in part on its ability to obtain patent
protection for its products, both in the U.S. and other countries. The patent
position of biotechnology and pharmaceutical companies is highly uncertain and
involves complex legal and factual questions. There is no consistent policy
regarding the breadth of claims allowed in biotechnology patents. The Company
intends to file applications as appropriate for patents covering both its
products and processes. As of the date of this Prospectus, Corvas holds rights
in nine U.S. patents and has been notified of four allowed patent
applications in the U.S. Of the issued patents, seven are owned by the
Company and two are licensed by the Company. Corvas has filed or holds licenses
to 55 additional patent applications that currently are pending in the U.S.
Patent and Trademark Office. Approximately one-third of these pending patent
applications are duplicate applications the Company filed in anticipation of
changes to U.S. patent law that became effective in June 1995 and that may
affect the term of U.S. patents. Foreign counterparts of certain of the U.S.
applications have been filed in many countries. In addition, Corvas holds
rights in four foreign-issued patents; Corvas owns one such patent and is the
exclusive licensee, in a defined field of use, of the remaining three foreign
patents. There can be no assurance that patents will issue from any of the
patent applications owned or licensed by the Company or that claims allowed
under any issued patents will be sufficiently broad to protect the Company's
technology. In addition, there can be no assurance that any patents issued or
licensed to the Company will not be challenged, invalidated or circumvented, or
that the rights granted thereunder will provide proprietary protection to the
Company.

As is typical in the biotechnology industry, the commercial success of the
Company will depend in part on the Company neither being found infringing on
patents issued to competitors nor breaching the technology licenses upon which
the Company's products might be based. While the Company is aware of third
party patent applications and issued patents in the Company's field, it is
uncertain whether these will require the Company to alter products or processes,
obtain licenses or cease certain activities. If the Company is required to
obtain such licenses, there can be no assurance the Company will be able to
obtain any necessary licenses at a reasonable cost. Failure by the Company to
obtain a license to any technology that it requires to commercialize its
products and obtain FDA approval within an acceptable period of time, if
required to do so, would have a material adverse effect on the Company.
Litigation, which could result in substantial costs to the Company, may also be
necessary to enforce any patents issued to the Company or to determine the scope
and validity of others' proprietary rights.

Certain of the Company's research has been funded in part by the SBIR
program. As a result of such funding, Government Rights will exist in any
technology, including inventions, developed with the funding. These rights
include the grant of a non-exclusive, paid-up, worldwide license to such
inventions for any governmental purpose. In addition, the government has the
right to require the Company to grant an exclusive license to any of such
inventions to a third party if the government determines that (i) adequate steps
have not been taken to commercialize such inventions, (ii) such action is
necessary to meet public health or safety needs or (iii) such action is
necessary to meet requirements for public use under federal regulations.
Federal law requires any licensor of an invention that was partially funded by
federal grants to obtain a covenant from its exclusive licensee to substantially
manufacture products using the invention in the U.S. In addition, the Company's
licenses may also relate to technology developed with federal funding and,
therefore, may also be subject to Government Rights.

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GOVERNMENT REGULATION

The production and marketing of the Company's products and its ongoing
research and development activities are subject to regulation by numerous
governmental authorities in the U.S. and other countries. Any drug developed by
the Company must undergo rigorous preclinical and clinical testing and an
extensive regulatory approval process mandated by FDA and equivalent foreign
authorities before it can be marketed. Various federal and, in some cases,
state statutes and regulations also govern or influence the manufacturing,
safety, labeling, storage, recordkeeping and marketing of such products. These
processes can take a number of years and require the expenditure of substantial
resources. Any failure by the Company or its collaborators or licensees to
obtain, or any delay in obtaining, regulatory approvals could adversely affect
the marketing of any products developed by the Company and its ability to
receive product or royalty revenue.

The activities required before a pharmaceutical agent may be marketed in
the U.S. begin with preclinical testing. Preclinical tests include laboratory
evaluation of product chemistry and animal studies to assess the potential
safety and efficacy of the product and its formulations. The results of these
studies must be submitted to the FDA as part of an Investigational New Drug
Application ("IND"), which must be reviewed and become effective pursuant to FDA
regulations before proposed clinical testing can begin. Typically, clinical
testing involves a three-phase process. In Phase I, clinical trials are
conducted with a small number of subjects to determine the early safety profile
and the pattern of drug distribution and metabolism. In Phase II, clinical
trials are conducted with groups of patients afflicted with a specified disease
in order to determine preliminary efficacy, optimal dosages and expanded
evidence of safety. In Phase III, large scale, multicenter, comparative
clinical trials are conducted with patients afflicted with a target disease in
order to provide enough data for the statistical proof of efficacy and safety
required by the FDA and others. The results of the preclinical and clinical
testing are then submitted to the FDA for a pharmaceutical product in the form
of a New Drug Application ("NDA"), or for a biological product in the form of a
Product License Application ("PLA"), for approval to commence commercial sales.
In responding to an NDA or PLA, the FDA may grant marketing approval, request
additional information or deny the application if it determines that the
application does not demonstrate to the satisfaction of the FDA that the product
is safe and effective for its labeled indications. With respect to biological
products, an Establishment License Application ("ELA") must also be filed, and
the FDA must approve the manufacturing facilities for the products. There can
be no assurance that approvals will be granted on a timely basis, if at all.

Among the conditions for NDA or PLA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
on an ongoing basis with Good Manufacturing Practices ("GMP"). In complying
with GMP, manufacturers must continue to expend time, money and effort in the
area of production and quality control to ensure full technical compliance.
Manufacturing facilities are subject to periodic inspections by the FDA, and
noncompliance may result in the withdrawal of previously granted approvals
and/or the imposition of other regulatory enforcement sanctions.

The Company is also subject to regulation by the Food and Drug Branch of
the California Department of Health Services ("FDB") and, prior to the
marketing of any of its products manufactured in California, the Company will be
required to secure a drug manufacturing license from the FDB. Such licenses are
issued after an FDB inspection of manufacturing facilities, and are reissued on
an annual basis after reinspection by the FDB.

The Company is also subject to various federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with the Company's
research. The extent of government regulation which might result from any
legislation or administrative action cannot be accurately predicted.

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COMPETITION

Due to the high incidence of cardiovascular and inflammatory diseases, most
of the major pharmaceutical companies have significant research and product
development programs in these areas. The Company expects to encounter
significant competition as to each of the products it seeks to develop. Several
existing products have well-established market positions and there are a number
of new antithrombotic products in advanced clinical development. The Company's
competitors include fully-integrated pharmaceutical and biotechnology companies
which have expertise in research and development, manufacturing processes,
testing, obtaining regulatory approvals and marketing, and may have financial
and other resources greater than those of the Company. Smaller companies also
may prove to be significant competitors. Furthermore, academic institutions,
government agencies and other public and private research organizations conduct
research relating to cardiovascular and inflammatory diseases and may seek
patent protection for, and establish collaborative arrangements for the
development and marketing of, products for the treatment of cardiovascular and
inflammatory diseases. Products developed by these and other entities may
compete directly with those being developed by the Company. These companies and
institutions may also compete with the Company in recruiting and retaining
highly qualified scientific personnel.

The Company's competition will be determined in part by the potential
indications for which the Company's products are developed and ultimately
approved by regulatory authorities, by the timing of such approvals and market
introduction and by whether any currently available drugs, or drugs under
development by others, are effective in the same indications. Accordingly, the
relative speed with which the Company can develop products, complete the
clinical trials and approval processes, and supply commercial quantities of the
products to the market is expected to be important competitive factors. The
Company expects that competition among products approved for sale will be based,
among other things, on product efficacy, safety, reliability, availability,
price and patent position.

PROPERTIES AND MANUFACTURING

The Company presently occupies approximately 30,200 square feet of
laboratory and office space in San Diego pursuant to a lease that expires in
September 1997 and has two one-year renewal options remaining.

The Company does not have manufacturing facilities for pilot scale or
commercial production of compounds under development as therapeutic products.
The Company must presently rely on third parties to manufacture its candidate
products for clinical testing.

For its diagnostic product, the Company has established a quality control
and quality assurance program, including a set of standard operating procedures.
The Company relies on outside manufacturers for production of raw materials for
this product. For therapeutic products, however, the Company will need to
establish further manufacturing, quality control and quality assurance programs.
The Company will continue to be dependent on contract manufacturers or strategic
partners. There can be no assurance that these manufacturers will be available
or will meet the Company's requirements for quality, quantity and timeliness, or
that the Company would be able to find substitute manufacturers, if necessary.

HUMAN RESOURCES

As of May 24, 1996, Corvas employed 70 individuals on a full-time basis,
19 of whom hold Ph.D. degrees.

A significant number of the Company's management and professional employees
have had prior experience with pharmaceutical, biotechnology or medical product
companies. Corvas believes that it has been highly successful in attracting
skilled and experienced scientific personnel; however, competition for such
personnel is intense. None of the Company's employees is covered by a
collective bargaining agreement. All of the Company's employees are covered by
confidentiality and arbitration agreements, and certain of its officers have
employment contracts.

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LEGAL PROCEEDINGS

The Company, several of its current and former directors, and Centocor were
parties to a legal proceeding filed February 18, 1993 in the U.S. District Court
for the Southern District of California. The complaint was filed by a
stockholder of the Company who represented a class of
persons who purchased Corvas stock from January 30, 1992 through April 14, 1992.
A settlement was agreed upon and judgment of the Court entered on August 28,
1995. Upon final determination of allocations of stock to approved claimants,
the remaining Corvas settlement amounts were distributed in May 1996. The
Company continues to deny all claims of wrongdoing and maintains this denial as
part of the settlement agreement.

In 1993, the U.S. Patent and Trademark Office declared an interference and
is currently in the process of determining the priority of invention between a
patent for which some rights are licensed to the Company and a patent
application for which rights are licensed to another party. The subject matter
of these licenses is recombinant tissue factor which is used by Ortho to
determine the blood clotting abilities of patients (See "Commercial
Products"). The Company believes that its licensed patent should be upheld and
is contesting the other party's claims of prior invention. However, there can
be no assurance that such patent will be upheld.

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of the Company, and their ages as of
May 24, 1996, are as follows:

NAME AGE POSITION
---- --- ---------
<S> <C> <C>
Randall E. Woods. . . . . . . . . . . . . . . . . 44 President and Chief Executive Officer
John E. Crawford. . . . . . . . . . . . . . . . . 41 Executive Vice President, Chief Financial Officer and Secretary
Donald H. Picker, Ph.D. . . . . . . . . . . . . . 50 Executive Vice President and Chief Operating Officer
William C. Ripka, Ph.D. . . . . . . . . . . . . . 56 Senior Vice President, Chemical Research
Howard R. Soule, Ph.D.. . . . . . . . . . . . . . 45 Vice President, Product Development
George P. Vlasuk, Ph.D. . . . . . . . . . . . . . 40 Vice President, Biological Research
David S. Kabakoff, Ph.D.(1) . . . . . . . . . . . 48 Chairman of the Bboard of Directors
Thomas S. Edgington, M.D.(1). . . . . . . . . . . 64 Director
John H. Fried, Ph.D.(3) . . . . . . . . . . . . . 66 Director
Theodor H. Heinrichs(3) . . . . . . . . . . . . . 69 Director
M. Blake Ingle, Ph.D.(1)(2) . . . . . . . . . . . 54 Director
Michael Sorell, M.D.(2) . . . . . . . . . . . . . 48 Director
W. Leigh Thompson, Jr., M.D., Ph.D. . . . . . . . 57 Director
Gerard Van Acker(2) . . . . . . . . . . . . . . . 52 Director
Nicole Vitullo (3). . . . . . . . . . . . . . . . 39 Director

</TABLE>

__________________

(1) Member of Executive Committee

(2) Member of Audit Committee

(3) Member of Compensation and Stock Option Committee

RANDALL E. WOODS has been President and Chief Executive Officer since

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May 1996. Prior to that, he served as President of the U.S. Operations,
Boehringer Mannheim Pharmaceuticals Corporation from March 1994 to March 1996
and was Vice President of Marketing and Sales from December 1993 to March
1994. Prior to that, he served in various capacities at Eli Lilly & Company
from 1973 to December 1993. Mr. Woods received an M.B.A. degree from Western
Michigan University.

JOHN E. CRAWFORD, a founder of Corvas, has been Chief Financial Officer
since the Company's organization in May 1987, Executive Vice President since
April 1989 and Secretary since March 1991. Mr. Crawford also served as
President from May 1987 to April 1989, Chief Operating Officer from April 1989
to February 1991, Secretary from May 1987 to June 1989 and as a director from
May 1987 to March 1991. Mr. Crawford received an M.B.A. from the University of
Chicago Graduate School of Business.

DONALD H. PICKER, Ph.D. joined Corvas in February 1996 as Executive
Vice President and Chief Operating Officer. Prior to joining Corvas, Dr. Picker
was employed by Genta, Inc. for four years, most recently as Senior Vice
President, Research and Development. From 1987 to 1991, he was employed at
Johnson Matthey, Inc., most recently as Worldwide Vice President, Biomedical
Research and Development. Dr. Picker received his Ph.D. in organic chemistry
from the State University of New York in Albany.

WILLIAM C. RIPKA, Ph.D. joined Corvas in May 1990 as Vice President,
Pharmaceutical Research. In January 1995, Dr. Ripka was promoted to Senior Vice
President, Chemical Research. Prior to joining Corvas, he was employed for
twenty-four years by E.I. duPont de Nemours & Co. in various research positions,
most recently as Research Fellow and Supervisor of Drug Design and Molecular
Modeling. Dr. Ripka received his Ph.D. in physical organic chemistry from the
University of Illinois.

HOWARD R. SOULE, Ph.D. has served as Vice President, Product
Development since February 1989. From May 1988 to February 1989, he served as
Director, Product Development. Dr. Soule was Program Manager of Infectious
Disease Research and Development at Kallestad Diagnostics from 1984 to 1988 and
previously worked as a Senior Research Chemist at Mallinckrodt, Inc. Dr. Soule
received his Ph.D. in virology from Baylor College of Medicine and has four
years of post-doctoral experience at The Scripps Research Institute.

GEORGE P. VLASUK, Ph.D. joined Corvas in August 1991 as Director,
Molecular Pharmacology. He served as Executive Director, Molecular Pharmacology
from July 1993 to January 1995, when he was promoted to Vice President,
Biological Research. Previously, he was employed for six years at Merck Sharp &
Dohme Research Laboratories, most recently as Associate Director of Hematology
Research. Dr. Vlasuk received his Ph.D. in biochemistry from Kent State
University.

DAVID S. KABAKOFF, Ph.D. was named Chairman of the Board in January 1996
and has been a director since June 1989. He also served as President from April
1989 to May 1996, Chief Executive Officer from April 1989 to February 1991 and
from November 1991 to May 1996, and Chief Operating Officer from February 1991
to November 1991. Dr. Kabakoff is Executive Vice President and a director of
Dura Pharmaceuticals, Inc. and President of an affiliated development company,
Spiros Corporation.

THOMAS S. EDGINGTON, M.D., a founder of Corvas, has been a director since
May 1987 and served as Chairman of the Board from that time until February
1991. He is a Member of The Scripps Research Institute ("Scripps"), with
which he has been affiliated since 1965. Since 1968, Dr. Edgington has also
been adjunct Professor of Pathology at the University of California, San
Diego, and, from 1968 to 1974, he was head of the Department of Pathology and
Laboratory Medicine which he founded at Scripps. He has been Vice President
for Research, Chairman of the National Research Committee and a member of the
Board of Directors of the American Heart Association. He was a member of the
Board of Directors and the Past-President of the Federation of American
Societies for Experimental Biology.

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JOHN H. FRIED, Ph.D. was elected a director in May 1992. Dr. Fried
served in various executive capacities at Syntex Corporation ("Syntex") from
April 1964 to March 1992. He served as President of Syntex Research from 1976
to March 1992, Senior Vice President of Syntex from 1981 to 1985, and Vice
Chairman from 1985 to January 1993. Dr. Fried is Chairman of the Board of
Alexion Pharmaceuticals and President of Fried and Company, Inc.

THEODOR H. HEINRICHS joined the Board of Directors in February 1988. He
also served as Chief Executive Officer and Chairman of the Board from February
1991 through November 1991 and January 1996, respectively. Mr. Heinrichs is a
general partner with Hambrecht & Quist Life Science Venture Partners ("H&Q
LSV"), with whom he has been affiliated since 1985. Mr. Heinrichs served as
Chairman of the Board of Directors of Telios Pharmaceuticals, Inc. ("Telios")
from January until June 1994. Telios filed for protection under Chapter 11 in
the Federal Bankruptcy Court in January 1995 and was subsequently acquired by
INTEGRA, L.S. Mr. Heinrichs also served as Chief Executive Officer of Canji,
Inc. ("Canji") from its inception through March 1993 and was Chairman of the
Board until March 1995. Canji was acquired by Schering-Plough in 1996.

M. BLAKE INGLE, Ph.D. was elected a director in January 1994. Dr.
Ingle was the President and Chief Executive Officer of Canji from March 1993 to
February 1996, when it was acquired by Schering-Plough. Prior to that, he was
employed in a variety of capacities with the IMCERA Group, Inc., consisting of
Mallinckrodt Medical, Mallinckrodt Specialty Chemicals and Pitman Moore from
1980 to 1993, most recently serving as President/Chief Executive Officer. Dr.
Ingle was a director of Telios and was its Chief Executive Officer from December
1994 to January 1995. He currently serves as a director for Synbiotics
Corporation and as a member of the Board of Trustees at La Jolla Cancer Research
Foundation.

MICHAEL SORELL, M.D. was appointed a director in April 1996. He, with
several partners, is currently forming an investment bank based in New
York. He was associated with Morgan Stanley & Co. in various capacities, the
last being Principal, from July 1986 to February 1992. He left the firm to
become a partner in a joint venture with Essex Investment Management
of Boston. In August 1994, he rejoined Morgan Stanley as the emerging
growth analyst and principal where he served until February 1996. Prior to
that, he was on staff at Memorial Sloan-Kettering Cancer Center and worked in
Clinical Development at Schering-Plough Corporation.

W. LEIGH THOMPSON, JR., M.D., Ph.D. was appointed as a director in
January 1996. Dr. Thompson retired as Chief Scientific Officer of Eli Lilly and
Company in 1995, where he had served in various capacities since 1982. He is
the President and Chief Executive Officer of Profound Quality Resources, Ltd., a
consulting company, and serves on the Board of Directors for GENEMEDICINE, INC.,
DNX Corporation, Guilford Pharmaceuticals and Orphan Medical, Inc.

GERARD VAN ACKER has been a director since March 1991. Mr. Van Acker
has been President and Chief Executive Officer of Gewestelijke
Investeringsmaatschappij voor Vlaanderen, N.V. (The Investment Company for
Flanders) ("GIMV"), based in Antwerp, Belgium, since founding it in 1980. He
was a co-founder and the first President of PGS and currently serves as its
Vice-Chairman. Mr. Van Acker is also a director of BARCO, N.V.

NICOLE VITULLO was appointed a director in April 1996. She has been a
Vice President since November 1992 with Rothschild Asset Management, Inc., which
manages two publicly traded funds, International Biotechnology Trust ("IBT") and
Biotechnology Investments, Limited. She served as Director of Corporate
Communications at Cephalon, Inc. from July 1991 to November 1992. Prior to
that, she was Manager, Healthcare Investments at Eastman Kodak Company. Ms.
Vitullo serves on the boards of directors of Cytel Corporation, Anergen,
Incorporated, and LocalMed, Inc.

Mr. Van Acker was nominated for election as a director in accordance with
an agreement among the Company, GIMV and PGS, entered into in March 1991 under
which the Company issued shares of preferred stock (subsequently converted into
common stock) to GIMV and PGS. Pursuant to such agreement, the Company has
agreed that, for as long as the holders of such shares of stock hold not less
than 10% of the voting power of the

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Company, it will nominate for election to the Board of Directors the number of
persons designated by such holders that they would be entitled to elect under
cumulative voting.

Each officer serves at the discretion of the Board of Directors subject to
existing employment agreements in the case of Mr. Woods, Mr. Crawford and Dr.
Picker. See "Management - Employment Agreements." The Company's Bylaws
permit the Board of Directors to establish by resolution the authorized
number of directors, and the Company currently has ten directors authorized.
The Company's Restated Certificate of Incorporation and Bylaws provide that
the Board of Directors shall be divided into three classes, each class
consisting, as nearly as possible, of one-third of the total number of
directors, with each class having a three-year term. Each director holds
office until the annual meeting of stockholders of the Company which
coincides with the end of such director's three-year term and until such
director's successors have been elected and duly qualified. There are no
family relationships among any of the directors or officers of the Company.

BOARD COMMITTEES

The Executive Committee presently consists of Drs. Kabakoff, Edgington and
Ingle. This committee is authorized to exercise the full authority of the Board
of Directors except with respect to (i) those matters not permitted by the
Delaware General Corporation Law to be delegated to any committee, (ii) approval
of obligations of the Company in amounts greater than $100,000, (iii) approval
of annual operating plans, business plans and major strategic decisions and
(iv) approval of other major transactions such as corporate partnerships or
financing plans.

The Audit Committee consists of Mr. Van Acker and Drs. Ingle and Sorell.
The Audit Committee, which meets periodically with management and the Company's
independent auditors, reviews the results and scope of the audit and other
services provided by the Company's independent auditors and reviews internal
accounting procedures and the adequacy of internal controls.

The Compensation and Stock Option Committee consists of Mr. Heinrichs, Dr.
Fried and Ms. Vitullo. This committee reviews and recommends to the Board
salaries, incentives and other forms of compensation for officers and other
employees, administers the Company's various incentive compensation and benefit
plans, including the Company's 1991 Incentive and Compensation Plan, and
recommends policies relating to such plans.

DIRECTOR COMPENSATION

Members of the Board of Directors generally do not receive compensation for
service as directors or for service as members of any committee of the Board,
except as noted. Mr. Heinrichs and Dr. Edgington each received compensation of
$36,000 for service as non-employee members of the Executive Committee in 1995.
Dr. Edgington is currently receiving $36,000 for these services in 1996. Drs.
Fried, Ingle, Sorell and Thompson currently receive compensation at the rate of
$12,000 per year for service as outside directors unaffiliated with any
principal stockholder. The members of the Board are also eligible
for reimbursement for their expenses incurred in connection with Company
business in accordance with Company policy.

In addition, directors have received, and are anticipated to receive in the
future, stock options under the Company's equity incentive plans or otherwise.
Each non-employee director of the Company receives a non-discretionary stock
option grant annually under the Company's 1991 Incentive and Compensation Plan
("1991 Plan"). Options granted to the non-employee directors under the 1991
Plan are not intended by the Company to qualify as incentive stock options under
the Internal Revenue Code of 1986, as amended (the "Code"), nor do they
disqualify the members of the Compensation and Stock Option Committee as
"disinterested directors."

Pursuant to an agreement executed in 1988, Dr. Edgington presently receives
$36,000 annually for consulting services rendered to the Company.

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Pursuant to an agreement executed in June 1992, Dr. Fried presently
receives $12,000 annually for consulting services rendered to the Company.

Pursuant to an agreement executed in May 1996, Mr. Heinrichs presently
receives $12,000 annually for consulting services rendered to the Company.

Pursuant to an agreement executed in May 1996, Dr. Kabakoff will receive
$8,500 for consulting services rendered to the Company in May 1996.

COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Heinrichs, who currently serves on the Compensation and Stock Option
Committee of the Board, also served as Chief Executive Officer of the Company
from February 1991 to November 1991.

Dr. Fried, who currently serves on the Compensation and Stock Option
Committee of the Board, entered into an agreement with the Company in June 1992
pursuant to which Dr. Fried presently receives fees of $12,000 annually for
consulting services rendered to the Company.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following table sets forth for the years ended December 31, 1995, 1994
and 1993, compensation awarded, or paid to and earned by, the Company's Chief
Executive Officer and the four other most highly compensated executive officers
whose salary and bonus were in excess of $100,000 for services rendered to the
Company during the fiscal year ended December 31, 1995 (collectively, the
"Named Executive Officers"):

Long-Term
Compensation
Annual Compensation Awards
--------------------------------- ------------- All Other
Fiscal Compensation
Year Salary($)(1) Bonus($) Shares ($)(3)
Name and Principal -------- ----------- ------------ Underlying -------------
Position Options (#)(2)
- --------------------------- --------------
<S> <C> <C> <C> <C> <C>
David S. Kabakoff, Ph.D(4).... 1995 212,000 -- 164,285 3,971
Chairman, President & 1994 205,000 24,000 65,000 3,974
Chief Executive Officer 1993 205,000 -- -- 3,748

John E. Crawford.............. 1995 129,000 -- 85,000 2,725
Executive Vice President 1994 125,000 12,000 35,000 2,637
& Chief Financial Officer 1993 125,000 -- 15,000 2,507

William C. Ripka, Ph.D........ 1995 165,000 -- 68,000 4,694
Senior Vice President, 1994 160,000 12,000 25,000 4,732
Chemical Research 1993 160,000 -- -- 4,468

Howard R. Soule, Ph.D......... 1995 127,500 -- 40,000 2,406
Vice President, 1994 121,500 12,000 35,000 2,365
Product Development 1993 118,000 -- -- 2,215

George P. Vlasuk, Ph.D........ 1995 130,160 -- 63,257 843
Vice President,
Biological Research (5)

</TABLE>

42.

<PAGE>

- ------------------
(1) Includes amounts earned but deferred into the Company's 401(k)
Compensation Deferral and Savings Plan ("401(k) Plan") at the election
of the executive.

(2) The Company has not issued any restricted stock awards or stock
appreciation rights ("SARs") to date. These numbers include options
regranted by the Company in an exchange that took place on January 16,
1995. See "Option Grants in Last Fiscal Year."

(3) Includes amounts paid on behalf of executives for long-term disability
insurance premiums and life insurance premiums.

(4) Effective May 10, 1996, Dr. Kabakoff resigned as President and Chief
Executive Officer of the Company, but will continue as Chairman of the
Board. He was also a Consultant to the Company through May 31,
1996.

(5) Dr. Vlasuk became an executive officer in January 1995.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth, for the fiscal year ended December 31,
1995, certain information regarding options granted or repriced to each of the
Named Executive Officers:

Individual Grants
----------------------------------------------------------- Potential Realizable
Value at Assumed
Number of Percentage Annual Rates of Stock
Shares of Total Price Appreciation for
Underlying Options Exercise Option Terms ($)(6)(7)
Options Granted in Price Expiration ---------------------------
Name Granted Fiscal ($/Sh)(5) Date 5% 10%
- --------------------------- (#)(1)(3) Year(4) ----------- ----------- ----------- -----------
-------------- -------------
<S> <C> <C> <C> <C> <C> <C>
David S. Kabakoff, Ph.D.(8).... 164,285(1) 21.8% 2.1875 01/15/05 226,008 572,749

John E. Crawford............... 75,000(1) 9.9% 2.1875 01/15/05 103,178 261,473
10,000(2) 1.3% 3.8125 10/12/05 23,977 60,761

William C. Ripka, Ph.D......... 68,000(1) 9.0% 2.1875 01/15/05 93,548 237,069

Howard R. Soule, Ph.D.......... 30,000(1) 4.0% 2.1875 01/15/05 41,271 104,589
10,000(2) 1.3% 3.8125 10/12/05 23,977 60,761

George P. Vlasuk, Ph.D......... 63,257(1) 8.4% 2.1875 01/15/05 87,023 220,534

</TABLE>

_______________

(1) On January 16, 1995, the Compensation and Stock Option Committee of
the Board of Directors approved an offer for all employees, including
officers, to exchange outstanding options with exercise prices greater
than $2.44 per share for an equivalent number of options issued under
the 1991 Plan at the fair market value on January 16, 1995. The new
options did not vest for six months from the date of grant (12 months
for executive officers), at which time the options vested in the
equivalent percentage as the canceled options at the

43.

<PAGE>

time such options were canceled. After the initial vesting of at least
25%, the remainder of the options vest 6.25% per quarter. The options
remain exercisable for 10 years from the new grant date. For each
employee, the receipt of the replacement grant was subject to the
employee's consent to the cancellation of the original grants.

(2) Options granted on October 13, 1995 vest over a four year period, 25% on
the first anniversary of the grant date and 6.25% each quarter thereafter
until fully vested. Upon certain corporate events resulting in a change in
control, at the discretion of the Board of Directors, (i) the outstanding
options will be assumed or replaced by substitute options granted by any
surviving corporation, or (ii) the outstanding options will become
exercisable for a minimum of 30 days prior to such event.

(3) Options have a maximum term of 10 years measured from the grant date,
subject to earlier termination upon the optionee's cessation of service
with the Company.

(4) Based on an aggregate of 754,727 shares subject to options granted to
employees in fiscal 1995, including grants to Named Executive Officers and
shares subject to replacement options granted.

(5) The exercise price is equal to 100% of the fair market value of the Common
Stock on the date of grant, as determined by the Compensation and Stock
Option Committee of the Board of Directors.

(6) The 5% and 10% assumed rates of appreciation are suggested by the rules of
the Securities and Exchange Commission ("Commission") and do not represent
the Company's estimate or projection of the future Common Stock price.
There can be no assurance that any of the values reflected in the table
will be achieved. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent upon a number of factors, including the
future performance of the Common Stock, overall market conditions and the
timing of option exercises, if any.

(7) The potential realizable value is calculated based on the term of the
option at its time of grant (10 years in all cases above). It is
calculated by assuming that the stock price on the date of grant
appreciates at the indicated annual rate, compounded annually for the
entire term of the option and that the option is exercised and sold on the
last day of its term for the appreciated stock price. No gain to the
optionee is possible unless the stock price increases over the option term,
which will benefit all stockholders. For example, a stockholder who
purchased one share of stock on January 16, 1995 at $2.1875, held the stock
for 10 years and sold it on January 15, 2005 while the stock appreciated at
5% and 10% would have profits of $1.38 and $3.49, respectively, on his
$2.1875 investment.

(8) Effective May 10, 1996, Dr. Kabakoff resigned as President and Chief
Executive Officer of the Company, but will continue as Chairman of the
Board. He was also a consultant to the Company through May 31, 1996.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table sets forth information with respect to the exercise of
stock options by the Named Executive Officers, during the fiscal year ended
December 31, 1995 and the number and value of securities underlying unexercised
options held by the Named Executive Officers as of December 31, 1995:

NUMBER OF
SHARES UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS AT THE-MONEY OPTIONS AT
DECEMBER 31, 1995(#)(1) DECEMBER 31, 1995($)(1)(2)
---------------------------- -----------------------------
SHARES VALUE
ACQUIRED ON REALIZED
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ------------ -------- ----------- ------------- ----------- -------------

<S> <C> <C> <C> <C> <C> <C>
David S. Kabakoff, Ph.D(3) . . . . -- -- 53,743 164,285 257,966 544,194

John E. Crawford . . . . . . . . . -- -- -- 85,000 -- 265,312
</TABLE>

44.

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
William C. Ripka, Ph.D.. . . . . . 10,000 29,375 21,428 68,000 99,104 225,250
11,428 59,283
Howard R. Soule, Ph.D. . . . . . . -- -- 33,320 66,250 140,936 191,250

George P. Vlasuk, Ph.D.. . . . . . 5,143 26,679 20,611 42,646 68,273 141,264
</TABLE>

- --------------------------

(1) Includes options granted under the 1987 Stock Option Plan ("1987 Plan"),
the 1989 Stock Option Plan ("1989 Plan") and the 1991 Plan. Options
granted under the 1987 Plan and the 1989 Plan generally vest at the rate of
25% per year over four years and have a term of 10 years. In December
1991, the Board of Directors voted to terminate the 1987 Plan and the 1989
Plan, and no additional grants of options have been made under either of
such plans since they were terminated. Options granted under the 1991 Plan
generally have the vesting schedule reflected in Footnotes 1 and 2 of
"Stock Option Grants and Exercises."

(2) Amounts reflected are based on the fair market value of the Company's
Common Stock at December 31, 1995 ($5.375) minus the exercise price of the
options.

(3) Effective May 10, 1996, Dr. Kabakoff resigned as President and Chief
Executive Officer of the Company, but will continue as Chairman of the
Board. He was also a consultant to the Company through May 31, 1996.

EQUITY INCENTIVE PLANS

1987 AND 1989 STOCK OPTION PLANS

The Company has a 1987 Plan under which options were granted to key
employees and directors of, and consultants to, the Company. As of May 24,
1996, there are 102,529 shares of Common Stock reserved for issuance upon
exercise of currently outstanding options under the 1987 Plan, and no options to
purchase additional shares of Common Stock are available for future grant. In
addition, the Company has a 1989 Plan under which options were granted to key
employees and directors of, and consultants to, the Company. As of May 24,
1996, there are 23,743 shares of Common Stock reserved for issuance upon
exercise of currently outstanding options under the 1989 Plan and no shares
remain available for future grants. Both plans provide for the grant of
incentive stock options, intended to qualify as such under Section 422A of the
Code, and nonstatutory stock options.

The Board of Directors administers the 1987 Plan and the 1989 Plan
(collectively, "Stock Option Plans"). The maximum term of each option granted
under the Stock Option Plans is ten years. The aggregate fair market value of
the Common Stock with respect to which incentive stock options are first
exercisable by an optionee in any calendar year may not exceed $100,000.
Options granted under the Stock Option Plans generally are nontransferable and
expire 30 days after the termination of an optionee's service to the Company.
In general, if an optionee is permanently disabled or dies during his or her
service to the Company, such person's options may be exercised up to the earlier
of the options' expiration date or one year following such disability or death.

In December 1991, the Board of Directors voted to terminate the 1987 Plan
and the 1989 Plan, effective as of January 30, 1992. The Company has not made
any additional grants of options under either the 1987 Plan or the 1989 Plan
since the Board of Directors voted to terminate such plans. However, previously
granted options continue to be governed by the terms of the 1987 Plan or the
1989 Plan (and the option agreements executed thereunder), as applicable. As of
May 24, 1996, the Company had outstanding options under the Stock Option Plans
to purchase an aggregate of 126,272 shares held by 20 persons at the weighted
average per share exercise price of $1.06. The exercise price of all options
granted under the Stock Option Plans has equaled or exceeded the fair market
value of the Common Stock on the date of grant as determined in good faith by
the Compensation and Stock Option Committee of the Board of Directors. As of
May 24, 1996, options

45.

<PAGE>

to purchase 242,068 shares of Common Stock granted pursuant to the Stock Option
Plans have been exercised. As of May 24, 1996, there were no shares available
for future grant under the Stock Option Plans.

1991 INCENTIVE AND COMPENSATION PLAN

In December 1991, the Board of Directors adopted the 1991 Plan, under which
the Company may grant or issue incentive stock options, nonstatutory stock
options, stock appreciation rights, restricted stock awards, dividend
equivalents, performance awards and stock payments to key employees, officers
and directors of, and consultants to, the Company.

The 1991 Plan provides for the issuance of 1,275,000 shares of Common
Stock. The number of shares issuable under the 1991 Plan will automatically
increase each year such that the number of shares issuable at the beginning of
any fiscal year will equal 10% of the number of outstanding shares of Common
Stock, less the number of shares issued, and as to which options or other awards
have been granted and are outstanding under the 1991 Plan (other than annual
grants of nonstatutory options to non-employee directors) and the Stock Option
Plans. The 1991 Plan provides for appropriate adjustments in the numbers and
kind of shares subject to the 1991 Plan and to outstanding grants thereunder in
the event of stock splits, stock dividends and certain other types of
recapitalizations or restructurings.

In January 1996 and April 1996, the Board of Directors amended the 1991
Plan, subject to stockholder approval, to increase the aggregate number of
shares of Common Stock authorized for issuance under the 1991 Plan from
1,275,000 shares to 2,225,000 shares and to automatically increase the number of
shares issuable under the 1991 Plan each quarter such that the number of shares
issuable at the beginning of any fiscal quarter will equal 18% of the number of
outstanding shares of Common Stock, less the number of shares issued or subject
to outstanding options or other awards under the 1991 Plan (other than annual
grants of nonstatutory options to non-employee directors) and the Stock Option
Plans.

A Compensation and Stock Option Committee duly appointed by the Board of
Directors has authority to select the key employees, officers and directors of,
and consultants to, the Company to whom grants are to be made (provided that
incentive stock options may only be granted to employees of the Company), to
designate the type of grant or award to be issued, to designate the number of
shares covered by each grant or award, to impose a vesting schedule or other
restrictions on the grants or awards, to specify the amount and type of
consideration to be paid upon the exercise or receipt of a grant or award under
the 1991 Plan (provided that the exercise price of incentive stock options may
not be less than the fair market value of the underlying stock on the date of
grant), to interpret and adopt rules for the operation of the 1991 Plan and to
specify other terms of the grant or award, all subject to the terms of the 1991
Plan. The Compensation and Stock Option Committee may in its discretion
delegate to the Chief Executive Officer or the Secretary of the Company, or
both, all of its powers, other than the authority to make grants or awards under
the 1991 Plan. To the extent that the aggregate fair market value of stock with
respect to which incentive stock options are first exercisable by an optionee
during any calendar year (under the 1991 Plan and/or under the Stock Option
Plans) exceeds $100,000, such options shall be taxed as nonstatutory stock
options.

Under the 1991 Plan, on the date of the first meeting of the Board of
Directors (but in no event later than the 30th day of each fiscal year), each
director of the Company who is not an employee of the Company or a parent or a
subsidiary of the Company, will automatically receive an award of a nonstatutory
stock option exercisable for 5,000 shares of Common Stock. The exercise price
of such option will be 85% of the fair market value of such shares of Common
Stock on the date the option is granted, and the option shall become exercisable
as to 25% of the underlying shares on the first through fourth anniversaries of
the grant date.

As of May 24, 1996, the Company had outstanding options under the 1991 Plan
to purchase an aggregate of 1,567,060 shares held by 82 persons at the weighted
average per share exercise price of $3.68. The exercise price of all options
granted under the 1991 Plan has equaled or exceeded the fair market value of the
Common Stock on the date of grant as determined in good faith by the
Compensation and Stock Option

46.

<PAGE>

Committee of the Board of Directors. As of May 24, 1996, options to purchase
79,061 shares of Common Stock granted pursuant to the 1991 Plan have been
exercised.

In addition, the Board of Directors has granted, other than under the Stock
Option Plans and the 1991 Plan, nonstatutory options to purchase an aggregate of
47,142 shares of Common Stock at a weighted average exercise price of $3.02 per
share. The fair market value of the Common Stock on the grant dates, as
determined in good faith by the Board of Directors, was $0.88 per share and
$3.50 per share. In each case, the Board of Directors established the exercise
price of the option at a level it determined to be in the best interests of the
Company and necessary to achieve the compensatory purpose of the option. As of
May 24, 1996, the Company had outstanding nonstatutory options to purchase an
aggregate of 8,571 shares held by 2 persons at the weighted average per share
exercise price of $0.88. As of May 24, 1996, nonstatutory options to purchase
28,928 shares of Common Stock have been exercised.

47.

<PAGE>

EMPLOYEE STOCK PURCHASE PLAN

In December 1991, the Company adopted the Employee Stock Purchase Plan
("Purchase Plan") covering an aggregate of 150,000 shares of Common Stock. The
Purchase Plan is intended to qualify as an employee stock purchase plan within
the meaning of Section 423 of the Code. Under the Purchase Plan, the Board of
Directors may authorize participation by eligible employees, including officers,
in periodic offerings following the commencement of the Purchase Plan. The
Board of Directors may delegate administration of the Purchase Plan to a
committee selected by the Board of Directors.

Employees are eligible to participate in the Purchase Plan if they are
employed by the Company, or a subsidiary of the Company designated by the Board
of Directors, for at least 20 hours per week and are employed by the Company or
a subsidiary of the Company designated by the Board of Directors for at least
five months per calendar year. Employees who participate in an offering have up
to 10% of their earnings withheld pursuant to the Purchase Plan. The amount
withheld is then used to purchase shares of the Common Stock issued by the
Company on specified dates determined by the Board of Directors. The price of
Common Stock purchased under the Purchase Plan will be equal to 85% of the lower
of the fair market value of the Common Stock on the commencement date of each
offering period or on the relevant purchase date. Employees may end their
participation in the offering at any time during the offering period, and
participation ends automatically on termination of employment with the Company.

401(K) PLAN

In 1988, the Company adopted a 401(k) Plan covering all of the Company's
employees. Pursuant to the 401(k) Plan, employees may elect to reduce their
current compensation by up to the statutorily prescribed annual limit ($9,500 in
1996) and have the amount of such reduction contributed to the 401(k) Plan.
The 401(k) Plan is intended to qualify under section 401 of the Code so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan and so that contributions by the Company, if any, will be
deductible by the Company when made. The Trustee of the 401(k) Plan, at the
discretion of each participant, invests the assets of the 401(k) Plan in any of
the five investment options. The 401(k) Plan permits, but does not require,
qualified nonelective contributions and company profit sharing contributions by
the Company on behalf of all participants in the plan. The Company has not made
any such contributions to date, but does pay the transaction costs associated
with investment options under the 401(k) Plan.

EMPLOYMENT AGREEMENTS

Pursuant to an executive employment agreement between the Company and
John E. Crawford entered into in April 1989, Mr. Crawford receives a base
salary, bonuses and equity compensation as determined by the compensation and
Stock Option Committee of the Board of Directors. His current annual base
salary is $137,000. If Mr. Crawford's employment is terminated without cause
(or if he resigns under certain specified conditions, including a change of
control of the Company), he will receive as severance his then-current salary
and continued health insurance benefits over the 180-day period following the
date of termination. If Mr. Crawford's employment is terminated with cause or
he resigns, his compensation and benefits will cease immediately and he will
not be entitled to severance benefits. Upon his death or total disability, he
or his estate or personal representative shall be entitled to receive his
then-current salary and benefits

48.

<PAGE>

over the 180-day period following the date of such event.

Pursuant to an executive employment agreement between the Company and
Donald H. Picker, Ph.D. entered into in February 1996, Dr. Picker receives a
base salary, bonuses and equity compensation as determined by the Compensation
and Stock Option Committee of the Board of Directors. His current annual base
salary is $250,000. If Dr. Picker's employment is terminated without cause, he
will receive as severance his then-current salary and continued health insurance
benefits over the 180-day period following the date of termination. If
Dr. Picker's employment is terminated with cause or he resigns, his compensation
and benefits will cease immediately and he will not be entitled to severance
benefits. Upon his death or total disability, he or his estate or personal
representative shall be entitled to receive his then-current salary and benefits
over the 90-day period following the date of such event.

Pursuant to an executive employment agreement between the Company and
Randall E. Woods entered into in May 1996, Mr. Woods receives a base salary,
bonuses and equity compensation as determined by the Compensation and Stock
Option Committee of the Board of Directors. His current annual base salary is
$300,000. If Mr. Woods' employment is terminated without cause within one year
of his hire date, he will receive as severance (i) his then-current salary and
continued health insurance benefits over the 12-month period following the date
of termination, and (ii) one-fourth of the stock options granted to Mr. Woods
upon his employment with the Company will immediately vest and become
exercisable. If such termination occurs after the first year of his employment
with the Company, Mr. Woods will receive as severance his then-current salary,
continued health insurance benefits and continued stock option vesting over the
180-day period following the date of termination. If Mr. Woods' employment is
terminated with cause or he resigns, his compensation and benefits will cease
immediately and he will not be entitled to severance benefits. Upon his death
or total disability, he or his estate or personal representative shall be
entitled to receive his then-current salary and benefits over the 90-day period
following the date of such event.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

The Registrant's Amended and Restated Certificate of Incorporation and
Bylaws include provisions to (i) eliminate the personal liability of its
directors for monetary damages resulting from breaches of their fiduciary duty
to the extent permitted by Section 102(b)(7) of the Delaware General Corporation
Law ("Delaware Law") and (ii) require the Registrant to indemnify its directors
and officers to the fullest extent permitted by Section 145 of the Delaware Law,
including circumstances in which indemnification is otherwise discretionary.
The Registrant believes that these provisions are necessary to attract and
retain qualified persons as directors and officers. These provisions do not
eliminate the directors' duty of care and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware Law. In addition, each director will continue
to be subject to liability for breach of the director's duty of loyalty to the
Registrant, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for acts or omissions that the
director believes to be contrary to the best interests of the Registrant or its
stockholders, for any transaction from which the director derived an improper
personal benefit, for acts or omissions involving a reckless disregard for the
director's duty to the Registrant or its stockholders when the director was
aware or should have been aware of a risk of serious injury to the Registrant or
its stockholders, for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
Registrant or its stockholders, for improper transactions between the director
and the Registrant and for improper distributions to stockholders and loans to
directors and officers. The provision also does not affect a director's
responsibilities under any other law, such as federal securities laws or state
or federal environmental laws.

The Registrant has entered into indemnity agreements with each of its
directors and executive officers that require the Registrant to indemnify such
persons against expenses, judgments, fines, settlements and other amounts
incurred (including expenses of a derivative action) in connection with any
proceeding, whether actual or threatened, to which any such person may be made a
party by reason of the fact that such person is or was a director or an
executive officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith

49.

<PAGE>

and in a manner such person reasonably believed to be in, or not opposed to, the
best interests of the Registrant and, with respect to any criminal proceeding,
had no reasonable cause to believe his conduct was unlawful. The
indemnification agreements also set forth certain procedures that will apply in
the event of a claim for indemnification thereunder.

At present, there is no pending litigation or proceeding involving a
director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may result
in claims for indemnification by any officer or director.

The Registrant has an insurance policy covering the officers and directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.

CERTAIN TRANSACTIONS

In December 1994, the Company entered into a strategic alliance agreement
with Schering-Plough to collaborate on the discovery and commercialization of
oral thrombin inhibitor drugs for the prevention and treatment of chronic
cardiovascular disorders. The initial collaboration covers development of
inhibitors of thrombin, a key blood-clotting enzyme. In addition, Schering-
Plough acquired an exclusive option (which was extended to December 1996 upon
payment of $1,000,000) to expand the program to include inhibitors of a second
significant blood coagulation enzyme, Factor Xa.

Under the terms of the agreement, Schering-Plough will compensate the
Company for the costs of research and preclinical development of thrombin
inhibitors over two years. Schering-Plough, which is responsible for certain
preclinical development, all clinical trials and regulatory activities, received
exclusive worldwide manufacturing and marketing rights for resulting thrombin
inhibitors. The Company may also receive milestone payments and royalties on
sales of therapeutics resulting from this alliance. However, there can be no
assurance that products will be successfully developed and commercialized under
this alliance.

In connection with this alliance, Schering-Plough paid certain fees and
purchased 1,000,000 shares of Series A Convertible Preferred Stock of the
Company in 1994 resulting in net proceeds of $4,864,000. Revenue of $4,000,000
was recognized under this agreement in 1995. If the option for Factor Xa is
exercised, Schering-Plough has agreed to make an additional equity investment,
as well as payments for certain fees, research and development expenses, and
regulatory milestones. To date, Corvas has received a total of $14,000,000 from
Schering-Plough under the alliance. Schering-Plough beneficially owns
approximately 9.0% of the outstanding securities of the Company on an as-
converted basis.

In February 1996, the Company completed a private placement of equity
securities consisting of 3,000,000 units (the "Units"). Each Unit consisted
of one share of common stock and one callable warrant to purchase one
additional share of common stock. In connection with such private placement,
International Biotechnology Trust and AKKAD, both beneficial owners of more
than 5% of the outstanding securities of the Company, purchased 1,400,000 and
800,000 Units, respectively.

In February 1996, the Company loaned $300,000 to Dr. Picker in connection
with his employment with the Company. The loans were evidenced by two
promissory notes, one in the amount of $180,000 (the "$180,000 Note"), secured
by his primary residence in San Diego County, California, at an interest rate of
6% per annum, and one in the amount of $120,000 (the "$120,000 Note"), unsecured
and bearing no interest. The entire outstanding principal balance of the
$180,000 Note is due and payable in full upon the earlier of (i) five years from
the loan date or (ii) upon Dr. Picker's termination for cause. In April 1996,
Dr. Picker repaid $60,000 of the principal balance of the $120,000 Note. The
remaining $60,000 of the outstanding principal balance of the $120,000 Note is
due and payable in full thirty days after the earlier of (i) one year from the
loan date or (ii) Dr. Picker's termination for cause. The Company will forgive
the remaining $60,000 of the outstanding principal balance of the $120,000 Note
(i) one year from the date of the note provided Dr. Picker has been continuously
employed by the Company for one year or (ii) upon Dr. Picker's termination
without cause.

In February 1996, Dr. Picker entered into an employment agreement with the
Company. In May 1996, Mr. Woods entered into an employment agreement with the
Company. See "Management - Employment Agreements."

50.

<PAGE>

In May 1996, the Company granted Mr. Woods stock options under the 1991
Plan to purchase up to 325,000 shares of Common Stock at an exercise price of
$5.06 per share in connection with his employment with the Company. Such
options vest over four years: (i) one-fourth of the shares vest after twelve
continuous months of service with the Company, and (ii) the remaining three-
fourths of the shares vest at a rate of 6.25% for each subsequent quarter of
completed service.

51.

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PRINCIPAL STOCKHOLDERS

5% STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's stock as of May 24, 1996 and as adjusted to reflect
the sale of the Common Stock being offered hereby by each stockholder known by
the Company to be the beneficial owner of more than 5% of a class of the
Registrant's voting securities. Unless otherwise indicated in the footnotes to
this table, each of the stockholders named in this table has sole voting power
and investment power with respect to the shares indicated as beneficially owned.
Applicable percentages are based on 13,682,471 shares of Common Stock
outstanding on an as-converted basis on May 24, 1996 and 14,682,471 shares of
Common Stock outstanding on an as-converted basis after completion of this
Offering, adjusted as required by rules promulgated by the Commission.
Ownership information is based upon information furnished by the respective
entities, including any Schedule 13D or 13G.

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY
OWNED
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
- ---------------- ----- -------- --------

<S> <C> <C> <C>
Rothschild Asset Management Ltd.
International Biotechnology Trust plc(1) . . 2,800,000 18.6% 17.4%
Five Arrows House
St. Swithin's Lane
London EC4N 8NR
England

Wanger Asset Management, L.P.
227 West Monroe, Suite 3000
Chicago, IL 60606-5016
AKKAD (Acorn Fund)(2). . . . . . . . . . . . 1,600,000 11.0% 10.3%
c/o State Street Bank & Trust
225 Franklin Street
Boston, Massachusetts 02110

PGS International N.V.(3). . . . . . . . . . 1,334,793 9.8% 9.1%
Prins Hendriklaan 20
1075 BC Amsterdam, The Netherlands

GIMV, N.V.(4). . . . . . . . . . . . . . . . 1,142,857 8.4% 7.8%
Karel Oomsstraat 37
2018 Antwerp, Belgium
</TABLE>

52.

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Schering Corporation(5). . . . . . . . . . . 1,250,000(5) 9.0% 8.4%
2000 Galloping Hill Road
Kenilworth, New Jersey 07033
</TABLE>

- ----------------------

(1) Includes 1,400,000 shares of Common Stock issuable upon exercise of
warrants exercisable within 60 days of May 24, 1996.

(2) Includes 800,000 shares of Common Stock issuable upon exercise of warrants
exercisable within 60 days of May 24, 1996.

(3) PGS International Netherlands has sole voting and dispository rights to all
1,334,793 shares. PGS International Belgium, a subsidiary of PGS
International Netherlands, holds 300,000 of those shares in its name and
1,034,793 shares are held in the name of Chelsea, N.V., a subsidiary of
Plant Genetic Systems which is a subsidiary of PGS International Belgium.
Mr. Van Acker is Vice Chairman of Plant Genetic Systems and disclaims
beneficial ownership of these shares.

(4) Held by a subsidiary, Take Off Fonds, N.V. Excludes shares of Common Stock
held by PGS, of which GIMV owns 22% of the equity securities. GIMV
disclaims beneficial ownership of such shares. Mr. Van Acker is the
President and Chief Executive Officer of GIMV and disclaims beneficial
ownership of these shares.

(5) Includes 1,000,000 shares of Series A Convertible Preferred Stock on an as-
converted basis and 250,000 shares of Convertible Preferred Stock issuable
upon exercise of an option exercisable within 60 days of May 24, 1996.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of May 24, 1996 and as adjusted to reflect the
sale of the Common Stock offered hereby by (i) each director and nominee for
director, (ii) each of the Named Executive Officers, and (iii) all directors and
executive officers as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares, subject to community property laws where applicable.
Applicable percentages are based on 13,682,471 shares of Common Stock
outstanding on an as-converted basis on May 24, 1996 and 14,682,471 shares of
Common Stock outstanding on an as-converted basis after completion of this
Offering, adjusted as required by rules promulgated by the Commission.
Ownership information is based upon information furnished by the respective
individuals, including any Section 16 filings.

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY
OWNED
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
DIRECTORS: OWNED OFFERING OFFERING
- ---------- ----- -------- --------

<S> <C> <C> <C>
Nicole Vitullo(1). . . . . . . . . . . . . . 2,800,000 18.6% 17.4%

Gerard Van Acker(2). . . . . . . . . . . . . 2,490,864 18.2% 17.0%
</TABLE>

53.

<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C> <C>
Theodor H. Heinrichs(3). . . . . . . . . . . 688,624 5.0% 4.7%

Thomas S. Edgington, M.D.(4) . . . . . . . . 285,490 2.1% 1.9%

David S. Kabakoff, Ph.D.(5). . . . . . . . . 234,167 1.7% 1.6%

John H. Fried, Ph.D.(6). . . . . . . . . . . 39,750 * *

M. Blake Ingle, Ph.D.(7) . . . . . . . . . . 14,750 * *

Michael Sorell, M.D. . . . . . . . . . . . . -- -- --

W. Leigh Thompson, Jr., M.D., Ph.D.. . . . . -- -- --

Randall E. Woods . . . . . . . . . . . . . . -- -- --
</TABLE>

54.

<PAGE>

<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY
OWNED
SHARES -----------------------
BENEFICIALLY BEFORE AFTER
EXECUTIVE OFFICERS: OWNED OFFERING OFFERING
- ------------------- ----- -------- --------

<S> <C> <C> <C>
John E. Crawford(8). . . . . . . . . . . . . . . . . . . . . 198,172 1.4% 1.3%

William C. Ripka, Ph.D.(9) . . . . . . . . . . . . . . . . . 56,490 * *

Howard R. Soule, Ph.D.(10) . . . . . . . . . . . . . . . . . 62,943 * *

George P. Vlasuk, Ph.D.(11). . . . . . . . . . . . . . . . . 39,437 * *

All officers and directors as group (15 persons)(12) . . . . 6,910,687 44.6% 41.9%
</TABLE>

- -----------------------

* Less than 1%.

(1) Includes 1,400,000 shares of Common Stock and 1,400,000 shares of Common
Stock issuable upon exercise of warrants exercisable within 60 days of
May 24, 1996 owned by IBT. Ms. Vitullo is a vice president of Rothschild
Asset Management, Inc., which manages the IBT fund. Ms. Vitullo disclaims
beneficial ownership of such shares owned by IBT.

(2) Includes 13,214 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996, 1,334,793 shares beneficially
owned by PGS, of which Mr. Van Acker is the Vice Chairman, and 1,142,857
shares beneficially owned by GIMV, of which Mr. Van Acker is the Chief
Executive Officer. Mr. Van Acker disclaims beneficial ownership of such
shares beneficially owned by PGS and GIMV.

(3) Includes 18,928 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996 and 669,696 shares owned by H&Q
LSV and its affiliates. Mr. Heinrichs is a general partner of H&Q LSV.
Mr. Heinrichs disclaims beneficial ownership of such shares owned by H&Q
LSV and its affiliates.

(4) Includes 39,776 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996. Also includes 245,714 shares
held in a trust for which Dr. Edgington is both a trustee and a
beneficiary.

(5) Includes 116,196 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996. Also includes 4,000 shares
held by Dr. Kabakoff's wife as custodian for his minor children.

(6) Includes 34,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996.

(7) Includes 3,750 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996.

(8) Includes 159,928 shares of Common Stock held in a trust for which Mr.
Crawford is both a trustee and a beneficiary and 38,124 shares issuable
upon exercise of options exercisable within 60 days of May 24, 1996.

(9) Includes 56,490 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996.

(10) Includes 62,382 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996.

55.

<PAGE>

(11) Includes 37,294 shares of Common Stock issuable upon exercise of options
exercisable within 60 days of May 24, 1996.

(12) Includes 1,820,904 shares of Common Stock issuable upon exercise of options
exercisable within 60 days. See notes (1) through (11) above.

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized to issue 50,000,000 shares of Common Stock, $.001
par value per share, and 10,000,000 shares of undesignated Preferred Stock,
$.001 par value per share.

COMMON STOCK

As of May 24, 1996, there were 12,682,471 outstanding shares of the
Company's Common Stock. Holders of Common Stock are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders.
Subject to preferences that may be applicable to any outstanding shares of
Convertible Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends, if any, as may be declared by the Board of Directors out
of funds legally available for the payment of dividends. See "Dividend Policy."
In the event of a liquidation, dissolution or winding up of the Company, holders
of Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of
Convertible Preferred Stock. Holders of Common Stock have no preemptive rights
or rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. All shares of Common Stock issuable upon conversion of the
outstanding shares of Convertible Preferred Stock will be validly issued, fully
paid and nonassessable upon such conversion.

CONVERTIBLE PREFERRED STOCK

As of May 24, 1996, there were 1,000,000 outstanding shares of the
Company's Series A Convertible Preferred Stock and an option to purchase an
additional 250,000 shares of the Company's Convertible Preferred Stock. All
such outstanding shares of the Company's Series A Convertible Preferred Stock
is convertible into one share of the Company's Common Stock and will
automatically convert if the market price of the Company's Common Stock for
10 consecutive trading days exceeds $7.50 per share. Pursuant to the
Company's Certificate of Incorporation, the Board of Directors has the
authority, without further action by the stockholders, to issue shares of
Preferred Stock in one or more series and to fix the designations, powers,
preferences, privileges, and relative participating, option or special rights
and the qualifications, limitations or restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, any or all of which may be greater than the rights
of the Common Stock. The Board of Directors, without stockholder approval,
can issue Preferred Stock with voting, conversion or other rights that could
adversely affect the voting power and other rights of the holders of Common
Stock. Preferred Stock could thus be issued quickly with terms calculated to
delay or prevent a change in control of the Company or make removal of
management more difficult. Additionally, the issuance of Preferred Stock may
decrease the market price of the Common Stock, and may adversely affect the
voting and other rights of the holders of Common Stock.

WARRANTS

As of May 24, 1996, there were outstanding warrants to purchase an
aggregate of 3,008,715 shares of Common Stock at a weighted average exercise
price of $6.00 per share.

REGISTRATION RIGHTS

The holders of approximately 3,845,973 shares of Common Stock and their
permitted transferees (the "Holders") are entitled to certain rights with
respect to the registration of such shares under the Securities Act.

56.

<PAGE>

Under the terms of an agreement between the Company and the Holders, if the
Company proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other security holders
exercising registration rights, the Holders are entitled to notice of such
registration and are entitled to include shares of such Common Stock therein.
The Holders also have the right to request that the Company file a registration
statement under the Securities Act at the Company's expense with respect to
their shares of Common Stock, and the Company is required to use its best
efforts to effect such registration. In addition, such Holders may require the
Company to file registration statements on Form S-3 when such registration form
becomes available to the Company. All such registration rights are subject to
certain conditions and limitations, including the right of the underwriters of
an offering to limit the number of shares to be included in such registration.
Generally, the Company is required to bear the expense of all "piggy-back" and
demand registrations (but not registrations on Form S-3 requested by the
Holders), except for stock transfer fees and underwriters' fees, discounts or
commissions relating to the sale of securities by holders.

Schering-Plough, which holds 1,000,000 shares of Series A Convertible
Preferred Stock, and its permitted transferees are entitled to certain rights
with respect to the registration of such shares under the Securities Act. Under
the terms of an agreement between the Company and Schering-Plough, if the
Company proposes to register any of its securities under the Securities Act,
either for its own account or for the account of other security holders
exercising registration rights, Schering-Plough is entitled to notice of such
registration and is entitled to include its converted shares therein. In
addition, Schering-Plough may require the Company to file registration
statements on Form S-3 when such registration form becomes available to the
Company. All such registration rights are subject to certain conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares to be included in such registration. Generally, the Company is
required to bear the expense of all "piggy-back" registrations (but not
registrations on Form S-3 requested by Schering-Plough), except for stock
transfer fees and underwriters' fees, discounts or commissions relating to the
sale of securities by holders.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Company is the transfer agent and registrar
for the Company's Common Stock.

57.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 13,682,471
shares of Common Stock outstanding, assuming no exercise of outstanding
options and warrants. Of these shares, the 1,000,000 shares of Common Stock
sold in this offering, the 3,000,000 shares sold in the Company's initial
public offering, the 3,000,000 shares sold in the Company's private placement
and registered on a Form S-3 Registration Statement and the 650,000 shares
previously sold and registered under the same Form S-3 Registration Statement
will be freely transferable without restriction under the Securities Act and
the regulations promulgated thereunder. The remaining 6,032,471 shares of
Common Stock held by officers, directors, employees, consultants and other
stockholders of the Company were sold by the Company in reliance on
exemptions from the registration requirements of the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the Securities
Act. These shares are freely tradable, subject in certain instances to
compliance with the provisions of Rules 144 and 701. In addition, an
aggregate of approximately 3,008,715 shares of Common Stock issuable upon
exercise of outstanding warrants is eligible for immediate sale under Rule
144 upon exercise of such warrants. Under all Stock Option Plans, and for
grants outside the Stock Option Plans, there are currently 564,567 shares of
Common Stock issuable upon exercise of outstanding options exercisable within
60 days. The Company also has 1,000,000 shares of Series A Convertible
Preferred Stock outstanding and an option to purchase an additional 250,000
shares of Convertible Preferred Stock.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for at least two years is entitled to sell, within any three-month
period, a number of shares that does not exceed the greater of (i) one percent
of the then outstanding Common Stock (approximately 136,825 shares immediately
after this offering) or (ii) the average weekly trading volume in the Common
Stock during the four calendar weeks preceding such sale, subject to the filing
of a Form 144 with respect to such sale and certain other limitations and
restrictions. In addition, a person who is not deemed to have been an affiliate
of the Company at any time during the three months preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least three years,
would be entitled to sell such shares under Rule 144(k) without regard to the
volume limitations described above or certain other restrictions of Rule 144.

Under Rule 701, an employee, officer or director of, or consultant to, the
Company who purchased shares pursuant to a written compensatory plan or contract
including the 1991 Plan, and who is not an affiliate of the Company, is entitled
to sell such shares without having to comply with the public information,
holding period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell such shares without having to comply with the Rule 144
holding period restrictions.

The holders of approximately 3,845,973 shares of Common Stock and 1,000,000
shares of Series A Convertible Preferred Stock and their permitted transferees
are entitled to certain rights with respect to the registration of such shares
under the Securities Act. See "Description of Capital Stock - Registration
Rights."

Sales of a substantial number of shares of Common Stock by existing or by
stockholders purchasing in this offering could have a negative impact on the
market price of the Common Stock.

PLAN OF DISTRIBUTION

The Common Stock is being offered to a limited number of investors directly
by the Company. The price of the Common Stock offered hereby will be determined
through negotiations between the Company and the purchasers.

58.
<PAGE>

In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Common Stock may not be sold unless it has been registered or qualified for
sale.

The Company will pay all of the expenses incident to the offering and sale
of the Common Stock.

LEGAL MATTERS

The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Cooley Godward Castro Huddleson & Tatum, San
Diego, California. Certain members of Cooley Godward Castro Huddleson & Tatum
beneficially own an aggregate of 23,941 shares of the Company's Common Stock.

EXPERTS

The consolidated financial statements of Corvas International, Inc. and
Subsidiary as of December 31, 1994 and 1995, and for each of the years in the
three-year period ended December 31, 1995, have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and in accordance therewith
files reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed by the Company may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington,
D.C. 20549, and at the SEC's following Regional Offices: Chicago Regional
Office, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and New
York Regional Office, Seven World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form S-1 under the Securities Act,
with respect to the shares of Common Stock offered hereby. This Prospectus does
not contain all of the information set forth in the Registration Statement and
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or any other document referred to are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to such Registration Statement, exhibits
and schedules. A copy of the Registration Statement and the exhibits and
schedules thereto may be inspected by anyone without charge at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and copies of all or any part of the
Registration Statement may be obtained from the Public Reference Section of the
Commission upon the payment of certain fees prescribed by the Commission.

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

PAGE

Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . F-1

Consolidated Balance Sheets as of December 31,
1994 and 1995 and March 31, 1996 (Unaudited) . . . . . . . . . . . . . . . F-2

Consolidated Statements of Operations for the three
years ended December 31, 1995 and for the three months
ended March 31, 1995 and 1996 (unaudited). . . . . . . . . . . . . . . . . F-3

Consolidated Statements of Stockholders' Equity (Deficit)
for the three years ended December 31, 1995 and for the
three months ended March 31, 1996 (unaudited). . . . . . . . . . . . . . . F-4

Consolidated Statements of Cash Flows for the three
years ended December 31, 1995 and for the three months
ended March 31, 1995 and 1996 (unaudited). . . . . . . . . . . . . . . . . F-5

Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . F-6

<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Corvas International, Inc.:

We have audited the accompanying consolidated balance sheets of Corvas
International, Inc. and subsidiary as of December 31, 1994 and 1995, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for each of the years in the three-year period ended December 31,
1995. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted out audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Corvas
International, Inc. and subsidiary as of December 31, 1994 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.

KPMG PEAT MARWICK LLP

San Diego, California
January 29, 1996, except for Note 13 to the consolidated financial statements,
as to which date is February 2, 1996.

F-1

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)

<TABLE>
<CAPTION>
December 31, March 31,
---------------------------- ------------
ASSETS 1994 1995 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,687 $ 1,427 $ 1,114
Short-term debt securities held to maturity and time
deposits, partially restricted (notes 2 and 7) 16,180 11,024 23,794
Receivables 306 338 301
Note receivable from related party (note 3) --- --- 120
Other current assets 242 250 486
----------- ----------- -----------
Total current assets 20,415 13,039 25,815

Property and equipment, net (notes 4 and 7) 2,094 1,423 1,375
Note receivable from related party (note 3) --- --- 180
----------- ----------- -----------
$ 22,509 $ 14,462 $ 27,370
----------- ----------- -----------
----------- ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 253 $ 272 $ 155
Accrued expenses 840 461 377
Accrued benefits 645 --- ---
Accrued vacation 169 205 228
Accrued litigation settlement expenses (note 13) 535 313 193
Current portion of capital lease obligation (note 7) 71 77 79
Deferred rent (note 7) --- 34 23
Deferred revenue (note 8) 4,000 4,305 3,190
----------- ----------- -----------
Total current liabilities 6,513 5,667 4,245
----------- ----------- -----------
----------- ----------- -----------

Long-term capital lease obligation (note 7) 104 27 7
Deferred rent (note 7) 245 --- ---
Deferred revenue (note 8) 1,000 --- ---

Stockholders' equity (note 5):
Series A convertible preferred stock, $.001 par value,
authorized 10,000,000 shares, issued and outstanding
1,000,000 shares at December 31, 1994 and 1995
and March 31, 1996 (liquidating preference $5 per share) 1 1 1
Common stock, $.001 par value, authorized 50,000,000
shares, issued and outstanding 9,352,000 shares at
December 31, 1994, 9,448,000 shares at December 31, 9 9 13
1995 and 12,522,000 shares at March 31,1996
Additional paid-in capital 69,149 69,346 84,323
Accumulated deficit (54,295) (60,588) (61,219)
Deferred compensation (83) --- ---
Foreign currency translation adjustment (134) --- ---
----------- ----------- -----------
Total stockholders' equity 14,647 8,768 23,118

Commitments and contingencies (notes 7 and 13)
----------- ----------- -----------
$ 22,509 $ 14,462 $ 27,370
----------- ----------- -----------
----------- ----------- -----------

</TABLE>

See accompanying notes to consolidated financial statements.

F-2

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Years Ended December 31, Three Months Ended March 31,
------------------------------------ ----------------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net product sales $ 323 $ 280 $ 406 $ 46 $ 21
Research grants (note 11) 192 667 --- --- ---
Revenue from collaborative
agreements
(primarily from
related party) (note 8) --- --- 4,354 1,000 2,085
License fees (note 8) 100 --- 500 --- ---
Royalties (note 8) 230 183 142 34 81
------- ------- ------- ------- -------
Total revenues 845 1,130 5,402 1,080 2,187
------- ------- ------- ------- -------

COSTS AND EXPENSES:
Cost of products sold 105 83 211 5 24
Research and development (note 11) 12,115 11,378 9,723 2,259 2,299
General and administrative 3,067 3,159 2,582 682 793
Litigation settlement and related
expenses (note 13) --- 535 --- --- ---
Restructuring charge (note 9) --- 1,575 --- --- ---
------- ------- ------- ------- -------
Total costs and expenses 15,287 16,730 12,516 2,946 3,116
------- ------- ------- ------- -------

Loss from operations (14,442) (15,600) (7,114) (1,866) (929)
------- ------- ------- ------- -------

OTHER INCOME:
Interest income, net 1,073 686 835 249 268
Other income --- 11 (14) (32) 30
------- ------- ------- ------- -------
1,073 697 821 217 298
------- ------- ------- ------- -------

Net loss $(13,369) $(14,903) $ (6,293) $ (1,649) $ (631)
------- ------- ------- ------- -------
------- ------- ------- ------- -------

Net loss per share $ (1.44) $ (1.60) $ (0.67) $ (0.18) $ (0.05)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Shares used in calculation
of net loss per share 9,295 9,336 9,374 9,359 11,507
------- ------- ------- ------- -------
------- ------- ------- ------- -------

</TABLE>

See accompanying notes to consolidated financial statements.

F-3

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity (Deficit)
(In thousands)

<TABLE>
<CAPTION>
Series A
Convertible Preferred Stock Common Stock Additional
------------------------------ ------------------------- Paid-In
Shares Amount Shares Amount Capital
------------- -------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Balance as of December 31, 1992 --- $ --- 9,282 9 $ 64,306

Common stock issued upon exercise of
stock options --- --- 33 --- 32
Common stock issued pursuant to employee stock
purchase plan --- --- 11 --- 53
Amortization of deferred compensation --- --- --- --- (37)
Foreign currency translation adjustment --- --- --- --- ---
Net loss --- --- --- --- ---
------------- -------------- ----------- ----------- ------------

Balance as of December 31, 1993 --- --- 9,326 9 64,354

Common stock issued upon exercise of
stock options --- --- 14 --- 11
Common stock issued pursuant to employee stock
purchase plan --- --- 12 --- 30
Series A preferred stock issued for cash, net of
issuance costs 1,000 1 --- --- 4,863
Amortization of deferred compensation --- --- --- --- (109)
Foreign currency translation adjustment --- --- --- --- ---
Net loss --- --- --- --- ---
------------- -------------- ----------- ----------- ------------

Balance as of December 31, 1994 1,000 1 9,352 9 69,149

Common stock issued upon exercise of
stock options --- --- 74 --- 150
Common stock issued pursuant to employee stock
purchase plan --- --- 16 --- 35
Common stock issued pursuant to employee
performance stock award --- --- 6 --- 12
Amortization of deferred compensation --- --- --- --- ---
Foreign currency translation adjustment --- --- --- --- ---
Net loss --- --- --- --- ---
------------- -------------- ----------- ----------- ------------

Balance as of December 31, 1995 1,000 1 9,448 9 69,346

Common stock issued upon exercise of
stock options --- --- 24 --- 27
Common stock and warrants issued for cash in
private placement, net of issuance costs --- --- 3,000 3 14,832
Common stock issued in settlement of lawsuit --- --- 50 1 118
Net loss --- --- --- --- ---
------------- -------------- ----------- ----------- ------------

Balance as of March 31, 1996 (unaudited) 1,000 $ 1 12,522 $ 13 $ 84,323
------------- -------------- ----------- ----------- ------------
------------- -------------- ----------- ----------- ------------

<CAPTION>
Foreign Total
Currency Stockholders'
Accumulated Deferred Translation Equity
Deficit Compensation Adjustment (Deficit)
------------- -------------- ----------- -----------
Balance as of December 31, 1992 $ (26,023) $ (644) $ (56) $ 37,592

Common stock issued upon exercise of
stock options --- --- --- 32
Common stock issued pursuant to employee stock
purchase plan --- --- --- 53
Amortization of deferred compensatio --- 265 --- 228
Foreign currency translation adjustme --- --- (62) (62)
Net loss (13,369) --- --- (13,369)
------------- -------------- ----------- -----------

Balance as of December 31, 1993 (39,392) (379) (118) 24,474

Common stock issued upon exercise of
stock options --- --- --- 11
Common stock issued pursuant to employee stock
purchase plan --- --- --- 30
Series A preferred stock issued for cash, net of
issuance costs --- --- --- 4,864
Amortization of deferred compensation --- 296 --- 187
Foreign currency translation adjustment --- --- (16) (16)
Net loss (14,903) --- --- (14,903)
------------- -------------- ----------- -----------

Balance as of December 31, 1994 (54,295) (83) (134) 14,647

Common stock issued upon exercise of
stock options --- --- --- 150
Common stock issued pursuant to employee stock
purchase plan --- --- --- 35
Common stock issued pursuant to employee
performance stock award --- --- --- 12
Amortization of deferred compensation --- 83 --- 83
Foreign currency translation adjustment --- --- 134 134
Net loss (6,293) --- --- (6,293)
------------- -------------- ----------- -----------

Balance as of December 31, 1995 (60,588) --- --- 8,768

Common stock issued upon exercise of
stock options --- --- --- 27
Common stock and warrants issued for cash in
private placement, net of issuance costs --- --- --- 14,835
Common stock issued in settlement of lawsuit --- --- --- 119
Net loss (631) --- --- (631)
------------- -------------- ----------- -----------

Balance as of March 31, 1996 (unaudited) $ (61,219) $ --- $ --- $ 23,118
------------- -------------- ----------- -----------
------------- -------------- ----------- -----------

</TABLE>

See accompanying notes to consolidated financial statements.

F-4

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
IN THOUSANDS

Three Months Ended
Years Ended December 31, March 31,
------------------------------------------- ---------------------------
1993 1994 1995 1995 1996
------------------------------------------- ---------------------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (13,369) $ (14,903) $ (6,293) $ (1,649) $ (631)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 737 814 834 192 211
Amortization of premiums and discounts on investments 145 (26) (377) 21 (41)
Amortization of deferred compensation 228 187 83 21 ---
Stock compensation expense --- --- 12 12 ---
Translation loss --- --- 92 --- ---
Common stock issued in settlement of lawsuit --- --- --- --- 119
Loss on disposal of property and equipment --- --- 154 --- ---
Change in assets and liabilities:
(Increase) decrease in receivables (260) 346 (32) 45 37
(Increase) decrease in other current assets (2) 107 (8) (218) (236)
Increase (decrease) in accounts payable, accrued
expenses, accrued benefits, accrued vacation and
accrued litigation settlement expenses 745 738 (1,191) (1,323) (298)
Increase (decrease) in deferred revenue --- 5,000 (695) (1,000) (1,115)
Decrease in deferred rent (30) (99) (211) (36) (11)
------------ ------------ ----------- ----------- ----------

Net cash used in operating activities (11,806) (7,836) (7,632) (3,935) (1,965)
------------ ------------ ----------- ----------- ----------

Cash flows from investing activities:
Purchases of investments held to maturity (6,356) (23,587) (14,927) (5,111) (15,927)
Proceeds from maturity of investments held to maturity 20,788 28,728 20,460 6,200 3,200
Purchases of property and equipment (1,099) (443) (577) (103) (164)
Proceeds from sale of property and equipment --- --- 256 278 ---
Repayments from (loans to) employees (150) 150 --- --- (300)
------------ ------------ ----------- ----------- ----------

Net cash provided by (used in) investing activities 13,183 4,848 5,212 1,264 (13,191)
------------ ------------ ----------- ----------- ----------

Cash flows from financing activities:
Principal payments under capital lease obligation --- (46) (71) (17) (19)
Net proceeds from issuance of preferred stock --- 4,864 --- --- ---
Net proceeds from issuance of common stock 77 41 185 5 14,862
------------ ------------ ----------- ----------- ----------
Net cash provided by (used in) financing activities 77 4,859 114 (12) 14,843
Effect of exchange rate changes on cash (95) (69) 46 (157) ---
------------ ------------ ----------- ----------- ----------

Net increase (decrease) in cash and cash equivalents 1,359 1,802 (2,260) (2,840) (313)

Cash and cash equivalents at beginning of period 526 1,885 3,687 3,687 1,427
------------ ------------ ----------- ----------- ----------

Cash and cash equivalents at end of period $ 1,885 $ 3,687 $ 1,427 $ 847 $ 1,114
------------ ------------ ----------- ----------- ----------
------------ ------------ ----------- ----------- ----------
Supplemental disclosures:
Interest paid $ --- $ 9 $ 11 $ 3 $ 2
Noncash financing activities-
Equipment acquisitions under capital lease $ --- $ 221 $ --- $ --- $ ---

</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements
December 31, 1994 and 1995 and March 31, 1996 (unaudited)

(l) THE COMPANY

Corvas International, Inc. (the "Company") was incorporated on March 27,
1987 under the laws of the State of California. In July 1993, the Company
reincorporated in the state of Delaware. The Company is engaged in the
design and development of a new generation of therapeutic agents for the
prevention and treatment of major cardiovascular and inflammatory diseases.
Prior to December 1994, the Company was considered to be in the development
stage for financial reporting purposes.

For years prior to 1995, financial statements of the Company were
consolidated to include the accounts of Corvas International, Inc. in San
Diego and its Belgian subsidiary, Corvas International, N.V. All material
intercompany balances and transactions have been eliminated in
consolidation. Operating activities at the Belgian subsidiary ceased in
December 1994 and the subsidiary was liquidated in December 1995.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) CASH EQUIVALENTS:

Cash equivalents consist of an investment in a short-term government
fund and are stated at cost, which approximates market value.

(b) SHORT-TERM DEBT SECURITIES HELD TO MATURITY AND TIME DEPOSITS:

Short-term debt securities consist of government-backed debt
instruments. Short-term debt securities are carried at amortized cost
which approximates market value and mature at various dates through
November 1, 1996. At March 31, 1996 and December 31, 1994 and 1995,
$60,000 of time deposits were restricted related to the facility
lease. See Note 7.

In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS 115"). SFAS 115
requires that investments be classified as "held to maturity",
"available for sale" or "trading securities". The Company records its
investments held to maturity at amortized cost, which approximates
fair value. Other investments in debt and equity securities are
recorded at fair market value. The cost of securities sold, if any,
is based on the specific identification method. The Company adopted
SFAS 115 effective January 1, 1994. The adoption of SFAS 115 did not
have a material impact on the Company's financial position or results
of operations.

Depreciation for financial reporting purposes is provided using the
straight-line method over estimated useful lives of three to five
years. Leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or estimated useful life of the
asset. Assets held under capital lease are amortized over the life of
the lease.

(d) RESEARCH AND DEVELOPMENT COSTS:

Research and development costs are expensed in the period incurred.

(e) PATENTS:

Costs to obtain and maintain patents are expensed as incurred.

F-6

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(f) NET LOSS PER SHARE:

Net loss per share is computed using the weighted average number of
common and common share equivalents outstanding. Common equivalent
shares from convertible preferred stock, stock options and warrants
are excluded from the computation as their effect is antidilutive.

(g) FOREIGN CURRENCY TRANSLATION:

Assets and liabilities of subsidiary operations denominated in foreign
currencies are translated at rates in effect at the end of the year.
Revenues and expenses are translated at average rates throughout the
year. The local currency is considered to be the functional currency,
and adjustments resulting from such translation are included in
foreign currency translation adjustment, a separate component of
stockholders' equity. To date, no sales have been generated by the
Company's foreign subsidiary, which was liquidated in 1995. See Note
9.

(h) REVENUE RECOGNITION:

Revenue on product sales is recorded at the time of shipment.
Research grant revenue is recognized as research and development
activities are performed under the terms of the research contracts.

Revenue from collaborative agreements is generally recognized over the
term of the agreement or upon achievement of certain milestones.
Advance payments received in excess of amounts earned are classified
as deferred revenue.

(i) RECLASSIFICATIONS:

Certain amounts in the 1993 and 1994 financial statements were
reclassified to conform with the 1995 presentation.

(j) USE OF ESTIMATES:

Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities,
revenues and expenses, and the disclosure of contingent assets and
liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ
from those estimates.

(k) FAIR VALUE OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" ("SFAS 107"), defines the
fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties. The carrying amount of cash and cash equivalents, short-term
debt securities held to maturity, time deposits, receivables, notes
receivable, other current assets, accounts payable, accrued expenses,
accrued benefits, accrued vacation, accrued litigation settlement
expenses, capital lease obligations, deferred rent and deferred
revenue, included in the accompanying consolidated balance sheets,
approximate the estimated fair value of those instruments because of
their short maturities.

(l) BASIS OF PRESENTATION:

The interim financial information contained herein is unaudited but,
in management's opinion, includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation.
Results for the interim periods are not necessarily indicative of
results for other interim periods or for the full year.

F-7

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(3) NOTES RECEIVABLE (UNAUDITED)

The notes receivable as of March 31, 1996 consist of loans to an officer of
the Company issued in February 1996 in connection with his employment with
the Company. The $120,000 loan, which is unsecured and bears no interest,
is due and payable in full on the earlier of one year from the loan date or
the officer's termination for cause. The $180,000 loan bears interest at
6% per annum and is secured by his primary residence. This loan is due and
payable in full on the earlier of five years from the loan date or the
officer's termination for cause.

(4) PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and are summarized as follows
(in thousands).

December 31, March 31,
--------------- ---------
1994 1995 1996
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Machinery and equipment $ 3,233 $ 2,906 $ 3,066
Furniture and fixtures 139 135 135
Leasehold improvements 670 732 735
------- ------- --------

Total property and equipment 4,042 3,773 3,936

Less accumulated depreciation
and amortization (1,948) (2,350) (2,561)
------- ------- --------

$ 2,094 $ 1,423 $ 1,375
------- ------- --------
------- ------- --------

</TABLE>
(5) STOCKHOLDERS' EQUITY

(a) CONVERTIBLE PREFERRED STOCK:

In December 1994, in conjunction with a strategic alliance with
Schering-Plough Corporation (See Note 8), the Company issued 1,000,000
shares of Series A Convertible Preferred Stock, resulting in net
proceeds of $4,864,000. Each share of Series A preferred stock is
convertible into one share of the Company's common stock, and will
automatically convert if the market price of the Company's common
stock for 10 consecutive trading days exceeds $7.50 per share. As a
result, 1,000,000 shares of common stock have been reserved for the
potential conversion of Series A preferred stock. Each share of
Series A preferred stock is entitled to a fixed, cumulative dividend
of $.40 per share per annum, when and if declared by the Board of
Directors. No such dividends have been declared. In addition, each
share is entitled to one vote and has a liquidating preference of
$5.00 plus any declared and unpaid dividends. The Company has a total
of 10,000,000 shares of authorized preferred stock.

(b) COMMON STOCK:

On February 2, 1996, the Company completed a private placement of
equity securities consisting of 3,000,000 units, resulting in proceeds
of $14,835,000, net of estimated issuance costs. Each unit consisted
of one share of common stock and one callable warrant to purchase one
additional share of common stock.

In February 1992, the Company completed its initial public offering of
3,000,000 shares of common stock, resulting in net proceeds of
$32,470,000. The Company filed Restated Articles of Incorporation in
February 1992 which increased to 50,000,000 the number of authorized
common shares.
F-8

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

The Company has several plans and arrangements under which incentive
stock options, non-statutory stock options, stock appreciation rights,
restricted stock awards, dividend equivalents, performance awards and
stock payments can be granted to key personnel, including officers,
directors, and outside consultants. The terms are determined by the
Compensation and Stock Option Committee of the Board of Directors.
Options have a term of 10 years and generally become exercisable over
a four-year period beginning one year from the date of grant at a
price per share not less than the fair market value on the date of
grant. All employee options granted after December 1, 1994 vest 25%
at the end of the first year and 6.25% per quarter each quarter
thereafter. Activity under these plans and arrangements from 1993
through 1995 is as follows (in thousands except per share amounts).

Options Exercise Price
------- --------------
<S> <C> <C>
Outstanding, December 31, 1992 761 $ 0.70 - $ 8.50
Granted 167 $ 4.00 - $ 7.88
Exercised (33) $ 0.70 - $ 3.50
Cancelled (55) $ 0.88 - $ 7.75
-----

Outstanding, December 31, 1993 840 $ 0.70 - $ 8.50
Granted 305 $ 2.44 - $ 4.94
Exercised (14) $ 0.70 - $ 0.88
Cancelled (43) $ 0.88 - $ 8.06
-----

Outstanding, December 31, 1994 1,088 $ 0.70 - $ 8.50
Granted 755 $ 1.75 - $ 4.31
Exercised (74) $ 0.70 - $ 3.50
Cancelled (711) $ 0.88 - $ 8.50
-----

Outstanding, December 31, 1995 1,058 $ 0.70 - $ 7.06
Granted 468 $ 3.72 - $ 4.94
Exercised (24) $ 0.70 - $ 2.19
Cancelled (2) $ 2.13 - $ 3.75
-----

Outstanding, March 31, 1996 (unaudited) 1,500 $ 0.70 - $ 7.06
-----
-----

</TABLE>

As of March 31, 1996, net options for 1,765,000 shares have been
granted since inception of the plan, 504,000 shares were vested and
exercisable, 265,000 shares were vested and had been exercised and
996,000 shares remain unvested. A total of 1,500,000 shares are
reserved for issuance pursuant to outstanding options, and no shares
are available for future grant.

In January 1995, the Company offered certain holders of stock options,
excluding outside directors of the Company, the opportunity to
exchange an issued option for a new stock option on a one-for-one
basis at the market value on January 16, 1995. After a waiting period
of 6 months (12 months for officers), vesting of the exchanged options
was restored to the level existing prior to the exchange. A total of
608,000 options at an average exercise price of $4.83 were exchanged
for options with an exercise price of $2.19 per share. These options
are included as grants and cancellations in the preceding table.

For certain options granted prior to the Company's initial public
offering, deferred compensation expense was recognized for the excess
of the deemed fair value over the exercise price at the date of grant.
This deferred compensation was amortized to expense ratably over the
vesting period of each option. As of December 31, 1995, all such
deferred compensation expense has been amortized.

F-9

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(d) PERFORMANCE AWARDS:

In January 1995, the Company granted a total of 6,000 shares of common
stock as a performance award to all employees, excluding senior
management of the Company. These shares were fully vested and non-
restrictive.

(e) WARRANTS:

In conjunction with the private placement of equity securities
completed in February 1996, the Company issued callable warrants to
purchase 3,000,000 shares of common stock. The warrants are
exercisable at $6.00 per share over a period of six years unless
called earlier by the Company.

In conjunction with the negotiation of equipment leases entered into
in 1990, the Company issued warrants to purchase approximately 9,000
shares of preferred stock (subsequently converted to common stock) to
the lessors in lieu of security deposits. The warrants are
exercisable at $6.13 or $7.00 per share over a period of ten years
from the inception of the leases. The lease agreements are described
in Note 7.

As of March 31, 1996, none of the outstanding warrants have been
exercised.

(f) STOCK PURCHASE PLAN:

In December 1991, the Company adopted an employee stock purchase plan
that provides for the issuance of up to 150,000 shares of common
stock. The plan is intended to qualify under Section 423 of the
Internal Revenue Code and is for the benefit of qualifying employees,
as designated by the Compensation and Stock Option Committee of the
Board of Directors. Under the terms of the plan, participating
employees are eligible to have a maximum of 10% of their compensation
withheld through payroll deductions to purchase shares of common stock
at the lower of 85% of the fair market value at the beginning of each
offering period or of the fair market value on predetermined dates.
As of March 31, 1996, 47,000 shares of common stock have been issued
pursuant to this plan.

(6) INCOME TAXES

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes'
("SFAS 109"). Under the asset and liability method of SFAS 109, deferred
tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be
recovered or settled. Under SFAS 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

The Company adopted SFAS 109 effective January 1, 1993. The adoption did
not have a material effect on the consolidated balance sheets or statements
of operations.

The Company has no net, taxable temporary differences which would require
recognition of deferred tax liabilities and, due to the uncertainty of
future realizability, has recorded a valuation allowance against any
deferred tax assets for deductible temporary differences and tax operating
loss carryforwards. The Company increased its valuation allowance by
approximately $2,400,000 and $2,200,000 for the years ended December 31,
1995 and 1994, respectively, primarily as a result of the increase in tax
operating loss carryforwards.

F-10

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

At December 31, 1995, the Company had available net operating loss
carryforwards of approximately $37,368,000 for federal income tax reporting
purposes which begin to expire in 2002. The net operating loss carry-
forwards for state purposes, which began to expire in 1995 and fully expire
in 2000, are approximately 50% of the federal tax amounts. The Company has
unused research and development tax credits for federal income tax purposes
of $2,314,000 at December 31, 1995.

In accordance with Internal Revenue Code Section 382, the annual
utilization of net operating loss carryforwards and credits existing prior
to a change in control may be limited.

(7) COMMITMENTS

(a) LEASE COMMITMENTS:

The Company currently leases its principal facility under an operating
lease and certain equipment under a capital lease. The facility lease
expires in September 1997 and has two one-year renewal options
remaining. Terms of the lease provide for escalating rent payments
during the lease term. For financial reporting purposes, rent expense
is recognized on a straight-line basis over the term of the lease.
Accordingly, rent expense recognized in excess of cash rent paid is
reflected as deferred rent. Total rent expense under this lease for
the years ended December 31, 1995, 1994 and 1993 was $733,000,
$722,000 and $710,000, respectively.

Through December 31, 1994, the Company had a lease commitment, which
commenced in 1993, with a related party for its Belgian operation.
See Notes 9 and 12. Rent expense for this operation for the years
ended December 31, 1994 and 1993 was $74,000 and $40,000,
respectively.

In 1990, the Company entered into equipment leases for a total of
$485,000 to be paid over 48 and 61 months. In 1991, the Company
entered into additional equipment leases for $243,000 in aggregate to
be paid over 37 and 42 months. As of December 31, 1995, these leases
have all expired. Lease expense on these operating leases for the
years ended December 31, 1995, 1994 and 1993 was $58,000, $247,000 and
$361,000, respectively.

In 1994, the Company entered into a capital equipment lease for
$221,000 to be paid over 36 months. The amortization expense on this
lease for the years ended December 31, 1995 and 1994 was $44,000 and
$30,000, respectively.

Annual future minimum commitments under these leases for years ending
December 31 are as follows (in thousands).

Operating Capital
Lease Lease
----- -----
<S> <C> <C>
1996 $ 652 $ 82
1997 --- 28
-------- -------

Total minimum lease payments $ 652 110
--------
--------
Less amount representing interest (6)
-------
Present value of capital lease payments 104
Less current portion (77)
-------
Long-term capital lease obligation $ 27
-------
-------

</TABLE>

F-11

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(b) LETTER OF CREDIT:

The Company has an unused standby letter of credit of $60,000 that
bears interest at the prime rate plus 1% and expires on September 30,
1996 with provisions for annual renewal. This letter of credit,
collateralized by a $60,000 time deposit, is pledged in lieu of a
security deposit against the principal facility lease discussed above.

(8) COLLABORATIVE AGREEMENTS

In October 1995, the Company entered into a research and option agreement
with Pfizer Inc. ("Pfizer") to collaborate on the development of neutrophil
inhibitory factor ("NIF"), an anti-inflammatory agent with therapeutic
potential for stroke and other indications. Of the $1,159,000 payment
received from Pfizer, license fees of $500,000 and revenue from
collaborative agreements of $354,000 were recorded in 1995 on the
accompanying statements of operations. The balance of $305,000 is included
in deferred revenue on the accompanying balance sheets. During the option
period, which concludes in October 1996 but may be extended by Pfizer until
April 1997, Pfizer will fund its own further development of NIF including
costs associated with clinical trials. If Pfizer exercises its option by
April 1997, pursuant to a license and development agreement, Corvas will
conduct certain development activities for an additional two-year period
and Pfizer will receive an exclusive, worldwide license to further develop,
manufacture and market NIF as a therapeutic agent. If the option to enter
into the license and development agreement is exercised, Pfizer will pay
the Company an additional license fee and will compensate the Company for
certain costs of research and preclinical development of NIF over a two-
year period. If products are successfully commercialized from this
agreement, the Company will also receive milestone payments and royalty
payments on product sales.

In December 1994, the Company entered into a strategic alliance agreement
with Schering Corporation ("Schering-Plough") to collaborate on the
discovery and commercialization of oral thrombin inhibitor drugs for the
prevention and treatment of chronic cardiovascular disorders. In January
1996, Schering-Plough extended to December 1996 its exclusive option to
expand the program to include a second blood clotting enzyme with a
$1,000,000 payment which is included as revenue during the three months
ended March 31, 1996 in the consolidated statements of operations. Under
the terms of the agreement, Schering-Plough will compensate the Company for
the costs of research and preclinical development of thrombin inhibitors
over two years. A $5,000,000 payment received in 1994 was recorded as
deferred revenue as of December 31, 1994. Of this amount, revenue of
$4,000,000 was recognized in 1995 and an additional $4,000,000 received
through December 31, 1995 has been recorded as deferred revenue on the
accompanying balance sheets. This additional $4,000,000 will be
recognized as revenue in 1996. The Company may also receive milestone
payments and royalties on sales of therapeutics resulting from this
alliance. Schering-Plough, which is responsible for certain preclinical
development and all future clinical trials and regulatory activities,
received exclusive worldwide manufacturing and marketing rights for any
resulting thrombin inhibitors.

Under a separate agreement also completed in December 1994, Schering-Plough
purchased 1,000,000 shares of Series A convertible preferred stock of the
Company resulting in net proceeds of $4,864,000. If the option described
above is exercised, Schering-Plough has agreed to an additional equity
investment.

F-12

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

In June 1992, the Company entered into two agreements with Ortho Diagnostic
Systems, Inc. ("Ortho"), a Johnson & Johnson company, granting Ortho
exclusive worldwide rights to market certain diagnostic reagents. Ortho is
obligated to order stipulated minimum amounts each year, or must pay the
Company the deficiency between the minimum and the amount actually ordered.
Net product sales for the years ended December 31, 1995, 1994 and 1993 were
$282,000, $169,000 and $166,000, respectively. These agreements provide
that Ortho pay royalties based on unit sales of this product, as well as
two milestone payments, the first of which was received in 1992. For the
years ended December 31, 1995, 1994 and 1993, royalties under this
agreement amounted to $142,000, $183,000 and $230,000, respectively.

In November 1991, Centocor, Inc. acquired an exclusive option pursuant to
which it licensed certain monoclonal antibody products under development by
the Company, as well as future monoclonal antibody products discovered or
acquired by the Company. In November 1991, Centocor exercised its option
to license a product which was undergoing clinical trials (designated by
the Company as CORSEVIN M) for which the Company received a cash license
payment of $750,000 in 1991. Centocor paid the Company $100,000 in each of
1993 and 1992 for rights to future monoclonal antibody products, and
terminated these option rights in 1994. The Company may also receive a
future milestone payment and royalties on product sales; however there is
no assurance that the product will be successfully developed.

The Company has also entered into research and licensing agreements with
scientific consultants, universities and other research institutions which
have required the Company to make royalty payments for the years ended
December 31, 1995, 1994 and 1993 of $15,000, $14,000 and 16,000,
respectively.

(9) RESTRUCTURING CHARGE AND LIQUIDATION OF SUBSIDIARY

In December 1994, the Company ceased operation of its research and
development subsidiary, Corvas International, N.V. in Gent, Belgium. The
Belgian operation accounted for 20% of the consolidated operating expenses
in 1994 (including a restructuring charge) and 20% in 1993. In connection
with this restructuring, the accompanying consolidated statements of
operations reflect a one-time charge to earnings of $1,575,000 in 1994 for
severance and other expenses. Included in accrued expenses as of December
31, 1994 was $164,000, which was paid in 1995.

Corvas International, N.V. was liquidated on December 19, 1995.
Substantially all of the assets have been liquidated and any remaining or
future liabilities have been assumed by the Company.

(10)EMPLOYEE BENEFITS PLAN

Effective January 1, 1988, the Board of Directors approved the Corvas
401(k) Compensation Deferral Savings Plan ("The Plan"), adopting provisions
of the Internal Revenue Code Section 401(k). The Plan was approved by the
IRS in 1989, and was amended and restated in 1994. The Plan is for the
benefit of all qualifying employees, and permits employee voluntary
contributions, qualified nonelective contributions and company profit
sharing contributions. No employer contributions have been approved by the
Board of Directors through March 31, 1996.

(11)RESEARCH GRANTS

For the years ended December 31, 1994 and 1993, research grant revenue of
$667,000 and $192,000, respectively, was recorded related to Small
Business Innovation Research (SBIR) and other grants. No such revenue was
recorded in 1995. The related expenses, which equal research grant
revenues, are recorded as research and development expenses in the
accompanying consolidated statements of operations.

F-13

<PAGE>

CORVAS INTERNATIONAL, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued

(12)RELATED PARTY TRANSACTIONS

Pursuant to the acquisition of the Belgian subsidiary, the Company entered
into a facility and equipment services agreement with a principal
shareholder of the Company in 1991. Under the terms of the agreement, the
Company acquired certain services in advance and committed to pay for other
services at the principal shareholder's determined cost. The Company
amortized $74,000 of prepaid services in 1993 and was charged $410,000 and
$361,000 in 1994 and 1993, respectively, pursuant to this agreement. See
Notes 7 and 9.

(13)LEGAL MATTERS

The Company, several of its current and former directors, and Centocor,
Inc. were parties to a legal proceeding filed February 18, 1993, in the
U.S. District Court for the Southern District of California. The complaint
was filed by a shareholder of the Company who represented a class of
persons who purchased Corvas stock from January 30, 1992 through April 14,
1992. A settlement was agreed upon and judgment of the Court entered on
August 28, 1995. The Company continues to deny all claims of wrongdoing
and maintains this denial as part of the settlement agreement. Of the
$535,000 charge related to this settlement recorded at December 31, 1994,
$193,000 and $313,000 remain accrued at March 31, 1996 and December 31,
1995, respectively.

In 1993, the U.S. Patent and Trademark Office declared an interference and
is currently in the process of determining the priority of invention
between a patent for which some rights are licensed to the Company and a
patent application for which rights are licensed to another party. The
subject matter of these licenses is recombinant tissue factor which is used
by Ortho to determine the blood clotting abilities of patients. The
Company believes that its licensed patent should be upheld and is
contesting the other party's claims of prior invention. However, there is
no assurance that such patent will be upheld.

F-14

<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF OFFER
TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.

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TABLE OF CONTENTS

Page
----
Prospectus Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Dividend Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Price Range of Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 12
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Selected Consolidated Financial Data . . . . . . . . . . . . . . . . . . . 14
Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . 16
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Description of Capital Stock . . . . . . . . . . . . . . . . . . . . . . . 50
Shares Eligible for Future Sale. . . . . . . . . . . . . . . . . . . . . . 52
Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Legal Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . 53

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